Payday lender Nimble has announced plans to transition into traditional lending and digital banking, a move that will see the lender offering a broader range of products.
Managing Director and CEO Gavin Slater said the shift was aimed at lowering its cost of capital and the lender would eventually stop offering payday loans.
While he initially had doubts about the payday lending sector, he now believes it’s important to address the financial exclusion for the benefit of Australians who need finance but can’t access it.
“There are aspects of the sector I really don’t like and I don’t condone predatory lending in any way, shape or form,” he said.
“A high proportion of our community are employed but do not have the savings or the discretionary cash to meet an unexpected event like a car repair.
“We only approve less than 20% of people that apply.”
He explained Nimble would continue to address a specific pain point for consumers.
“While short-term lending has come under a lot of criticism for the high-interest rates associated with the sector, the reality is that the need is real and we would like to offer more affordable rates by reducing our cost of capital,” he said.
“[I] personally welcome engagement from government, banks and industry superannuation funds to support our efforts to lower our funding costs so we can pass that benefit onto our customers.”
“We still want to find a way to look after [the payday loan] sector of the community, but at lower rates,” Mr. Slater said.
Before Mr. Slater joined Nimble, he led the government’s Digital Transformation Agency after spending 17 years at the National Australia Bank.
The CEO added that given the changing consumer banking habits sweeping the landscape and since millennials aged between 20 and 30 made up half of Nimble’s customers, Nimble believes it can achieve its goal of becoming a world-class digital bank.
The lender has “the team, technology, brand, and strategy to take on the banks and other providers to make it a reality,” he said.
Chairman Ben Edney noted Nimble’s expertise and experience in the digital lending and banking areas could be leveraged to offer complementary products.
“Nimble now has aspirations to become a full service and branchless digital bank with the planned new products representing the first step in this strategy. We are also in the process of completing due diligence around applying for a restricted banking licence,” Mr. Edney said.
Nimble launched as a payday lender in 2005 and focused on smaller short-term, unsecured loans – between $300 and $5,000 repaid over two to 22 months – before announcing its pivot in July 2019.
Nimble has commenced the process for applying for a full banking licence, and it has started offering larger personal loans of up to $25,000 before adding car loans and line of credit products to its widening product range. Nimble will also eventually offer home loans and deposits.
Mr. Slater noted Nimble had advantages over start-ups in the space since the company is already an established, profitable company with brand awareness. Nimble’s net profit leaped by 40% to reach $5.4 million in the year to 30 June 2018 and depending on the trajectory of the business, an ASX listing could be on the horizon, in three to five years.
“There’s a fantastic opportunity to leverage this capability and pivot the business and grow it into something bigger, with an eye to the future and a potential IPO event,” Mr. Slater said.