Nonbanks and alternative lenders have garnered attention in the banking industry due to their ability to partner with legacy banks and utilize technology to make financial transactions more efficient and convenient for users.
Consumers are attracted to the idea of completing loan applications and payments digitally, with no initial fees, and at low interest rates. Alternative lending companies and nonbank financial institutions have been able to cater to these demands by adapting to the digital age and remaining open to company growth.
Here is a list of some of the top alternative lending competitors.
1. Quicken Loans
In 2015 Quicken Loans transformed the mortgage industry with the introduction of Rocket Mortgage — its online mortgage application that reportedly takes less than 10 minutes to complete. With no other viable challengers to the status quo in sight, this online application was immediately appealing to tech-savvy applicants.
Rocket Mortgage propelled Quicken Loans into the digital mortgage sector — altering the traditional home loan application process and opening the door to smaller online lenders. According to Business Insider Intelligence’s Online Mortgage Lending Report, by Q4 2017, Quicken Loans had become the largest US residential mortgage originator by volume.
Learn more about Quicken Loans.
LoanDepot became popular in the mortgage loan market in 2017 when it introduced a suite of tools for consumers to fill out mortgage loan applications conveniently from their smartphones.
This alt lender has funded over $165 billion since it launched in 2010, and is the nation’s fifth largest retail mortgage originator — taking second place for largest nonbank consumer lender.
Learn more about LoanDepot.
PennyMac has stayed ahead of its alternative lending competitors by continuously adapting to consumers’ digital preferences. Catering to the online user, PennyMac provides digital loan support and allows consumers to submit documents electronically.
With no minimum income required, PennyMac offers a wide variety of loan options ranging from conventional and jumbo loans to U.S. Department of Veterans Affairs and Federal Housing Administration loan and mortgage programs.
Learn more about PennyMac.
OnDeck’s digital technology services and partnerships with incumbent financial services providers have secured it as a top alternative lending option for small- and medium-sized businesses (SMBs).
In 2018 OnDeck launched ODX to help banks build their own digital small-business lending products. The firm also partnered with JPMorgan in 2014 – and extended the partnership in 2017 – to create a platform allowing SMBs to access up to $200,000 in loans online.
Learn more about OnDeck.
5. Social Finance (SoFi)
Originally focused on student loan refinancing, SoFi now includes mortgage loan refinancing, mortgages, and personal loans. In 2019 SoFi expanded its offerings with the launch of SoFi Invest, which offers customers both active and automated investing options with no fees.
SoFi’s success as an alternative lending platform is largely due to its continuous committment to expanding its suite of financial services. In addition to the launch of SoFi Invest, the company also partnered with insurtechs Lemonade and Root in 2019 to add three more types of insurance to its product suite.
Learn more about SoFi.
6. Reali Loans
Reali Loans is an online alternative lending platform that has no origination fee or upfront charge, and accommodates tech-savvy customers looking for a convenient way to seek loans.
Reali’s platform allows users to complete a loan application completely online; customers can upload and sign documents electronically and track the progress of their loan, including payments, through the user dashboard.
Learn more about Reali Loans.
Kabbage is another online lending platform that has earned a spot on the list of top nonbank financial institutions. The startup offers business-to-business (B2B) operations, and in July 2019 it secured a $200-million revolving credit facility.
Particularly popular in SMB lending, Kabbage provides a suite of digital services where customers can link business information online to get an automatic financial review. Kabbage also allows users to withdraw from their line through three distinct methods: logging into a computer, using a mobile banking app, or swiping a Kabbage Card.
Learn more about Kabbage.
PayPal is a popular digital payments service that, among other products, offers several peer-to-peer (P2P) payment platforms — an industry that Business Insider Intelligence projects to grow at a 42.7% five-year compound annual growth rate to hit $574 billion by 2023. One of these services is Venmo, a P2P payment app that’s popular with millennials and on pace to drive $100 billion in volume in 2019.
Alongside P2P payments, PayPal offers a small business lending program that includes PayPal Working Capital (which allows merchants to apply for an interest-free loan up to $200,000, receive funds near instantly, and repay the loan plus a flat fee as a percentage of daily sales), as well as PayPal Business Loans, which offers a more traditional line of business financing up to $500,000.
PayPal offers various security services, including alerts of suspicious activity, in addition to easy check-out options where users can use PayPal to buy online. By adapting to consumers’ preferred digital channels and offering both personal payment and business lending options, PayPal has become popular amongst a variety of users.
Learn more about PayPal.
The banking industry is undergoing rapid disruption as consumers show an increasing appetite for digital channels and nontraditional financing. With the integration of new technologies in financial services well underway, it’s important for the industry’s principal decision-makers to stay informed on the success of alternative lending and nonbank financial institutions.
That’s why Business Insider Intelligence is launching Banking, our newest research coverage area that will keep you up to date on how nonbanks and alternative lending services are making their way to the forefront of the banking industry.
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