As traditional lending faces competitive pressure from the burgeoning online lenders, Wells Fargo & Company (WFC - Free Report) launched its own online small-business loan product – FastFlex. The new loan offering that will be available to existing customers later this month is “funded as soon as the next business day.”
FastFlex is targeting small business customers with strong cash inflows and short-term credit needs. The loan amount under this offering ranges from $10,000 to $35,000 at a competitive interest rate with one-year terms, and repayments to be made on weekly basis.
The new loan product comes as part of the broader strategy of the bank’s focus on the small businesses market. In 2014, the San Francisco-based banking giant set a five-year lending target of $100 billion. Since Jan 2014 till Mar 2016, Wells Fargo has provided $40.7 billion in new loans to small businesses. Notably, Wells Fargo had undertaken a pilot project similar to FastFlex last August.
Lisa Stevens, Wells Fargo’s head of Small Business said, “Because small businesses want faster, more convenient loan options, online and at competitive rates, we created Wells Fargo FastFlex Small Business Loan.”
By joining the online lending bandwagon with its limited experience Wells Fargo faces stiff competition from major players in the industry like LendingClub Corporation (LC - Free Report) and On Deck Capital, Inc. (ONDK - Free Report) . However, we believe the financial bigwig will certainly sketch a strategy to gain a strong foothold in its new venture.
As FinTech companies are gaining immense popularity due to peer-to-peer models, crowdfunding, and contactless payments, traditional banks have started collaborating with these virtual start-up firms in a bid to capitalize on the online boom. Notably, JPMorgan Chase & Co. (JPM - Free Report) has agreed to a strategic partnership with On Deck Capital to build its small-business unit. Under the agreement, JPMorgan will offer loans of up to $250,000 to its around 4 million small-business customers using OnDeck’s platform. Also, The Goldman Sachs Group, Inc. (GS) plans to commence online consumer lending later this year.
With stringent regulations and higher capital requirements, banks continue to face revenue challenges. Apart from resorting to several cost cutting measures, they are on a continuous look out for alternative sources of revenues. Further, the financial institutions continue to embrace new technology to attract and retain clients with hassle free services and an improved digital experience. Against such a backdrop, Wells Fargo’s move does not come as a surprise.
Wells Fargo currently carries Zacks Rank# 3 (Hold).
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