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Weemba, a new online provider that connects borrowers with lenders, reported Monday that loan listings relating to health-care expenses made up more than half of its requests so far.
October 24 -
Consumers are sharing more personal information online than ever — but they don't want to share it with banks. A few companies are trying to find a middle ground, helping consumers connect to lenders without exposing even basic contact information until absolutely necessary.
September 20
At a time when customers and activists are directing widespread and outspoken hostility at banks, lenders might want to change their tone by instead using the methods of online dating sites to build a more trusting customer relationship.
Earlier approaches to matching lenders and borrowers online had a greater resemblance to eBay than eHarmony. But online loan facilitator Weemba Inc.'s model puts the power in the borrowers' hands, treating them more as an equal partner in the negotiation than a product in a bidding war.
Just as some online dating sites have processes for screening out predators, Weemba lets in only the lenders that are certified to be non-predatory professionals and licensed in states where a license is required.
Lenders search for borrowers based on certain criteria, but
"Consumers want to develop a relationship with their banks, but they may not know it," says Alan Randolph, senior vice president of business development at City National Bank, a $4-billion-asset Miami company that has used Weemba since its beta launch in July.
Though City National has not yet closed any loans through Weemba, Randolph says the Miami startup provides a good tool to get a feel for potential borrowers in the market.
Other banks may also find Weemba useful if the vetting it does is cheaper than what they have to do themselves, experts say.
"A matching service is interesting if it takes away some overhead of financial institutions that still have to do screenings on a third party," says Jacob Jegher, a senior analyst with the research firm Celent.
A bigger question for bankers is why Weemba's borrowers are not going to their own banks for loans. They may not be doing so because they represent bad credit risks, or have been turned away for a loan, experts say.
Randolph disagrees.
"Weemba provides an opportunity for the client to find resources and to find financing opportunities that they may not get from their current bank," Randolph says.
Companies like Weemba also offer opportunities for banks to make their lending processes more transparent, says Stessa Cohen, research director of banking industry advisory services at Gartner Inc.
"It suggests banks need to listen to these trends," Cohen says.
Weemba takes some well-known pages from the social network playbook. Borrowers create both public and private profiles about themselves and the loan projects they'd like to fund, such as to fund an $8,000 business investment or an $800,000 home purchase.
Borrowers don't pay Weemba any money. The lender pays a flat $30 fee for a successful connection, though the connection may not necessarily lead to a loan.
Lenders also conduct their own underwriting assessments of the borrowers.
"When potential borrowers come through the system, they go through an Equifax identity validation and then also have to go through an [automated clearing house] validation transfer," says Annette Gallagher, chief executive of Weemba.
In that way, Weemba also helps banks comply with Patriot Act requirements, Gallagher says.
Loan requests typically range between $1,000 and $5 million, Gallagher says.
Weemba is still small — it has only 2000 members and 32 lenders, among them MedChoice Financial LLC, which provides loans primarily for medical purposes. (American Banker
Weemba is also going head-to-head with better-known companies such as Kiva Microfunds, Prosper Marketplace Inc. and Lending Club Corp.
LendingTree is the 800-pound gorilla in the loan lead generation space. LendingTree, a unit of Tree Inc., has worked with 30 million borrowers and it partners with close to 200 lenders. It also has a flat fee of about $30 per match, a company spokesman says.
Weemba will have to spend huge amounts of money on advertising to get any consumer recognition, says Ron Shevlin, senior analyst at Aite Group LLC.
"For the first couple of years, LendingTree spent an incredible amount of money to become a consumer brand," Shevlin says.
Gallagher says Weemba occupies a more specialized niche and doesn't need to do a large media campaign.
