How LendingClub Is Wielding Its Bank Charter to Steal Your Customers
By Steve Cocheo, Senior Executive Editor at The Financial Brand
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LendingClub’s acquisition of Radius Bank in 2021 turned a leading fintech marketplace lender into a bank holding company. In the last two years, LendingClub has brought on-stream a wave of new products designed to reinvent the company.
The strategy: Unsecured personal loans remain the core relationship, but the company wants to increasingly provide its customers with a full digital banking suite — including both savings and checking accounts tailored specifically to a borrowing-focused customer base.
“The goal is to transition from being a company that you borrow money from, set up on autopay, and don’t engage with anymore, to being top of mind,” says Mark Elliot, chief customer officer.
Why it matters: Two years ago, only one in four LendingClub customers regularly logged into their accounts. Recent steps have now almost doubled the number of digitally active members.
“Targeted primacy:” LendingClub seeks to be primary provider to a specific demographic of heavy credit users. Elliot says as the company’s evolving approach gains traction, some customers will see LendingClub Bank as their primary financial institution.
“They’re more likely when they have a borrowing need or a savings need to come to us first, because they know we’re going to offer better value than their traditional bank,” says Elliot.
What’s next: A new brand: As LendingClub pushes beyond owning about 10% of the market share in unsecured personal loans, a rebrand is in the offing for 2026.
Need to Know:
- LendingClub targets “the motivated middle” — consumers with above-average annual incomes ($50,000 to $200,000) who use a lot of consumer credit. About a third of U.S. consumers fall into this group, which carries a higher-than-average FICO score of 719.
- The motivated middle is driven by lifestyle choices — what the company calls “pull forward purchases” : furnishing a house or getting fertility treatments now, not someday.
- LendingClub has long positioned itself as a “financial health” brand, offering refinancing and consolidation options that can save consumers up to 7% versus credit cards. With credit card spending at all-time highs, the company sees potential for good growth.
LendingClub’s funding strategy is a dynamic balancing act between originating loans for marketplace partners and for its own portfolio.
The company continues to blend its funding because its loans average in a 9.5% net asset yield right now. On balance sheet, the all-in cost of funds comes to around 3.5%. This leaves a lucrative 6%.
Why does LendingClub sell any loans, splitting that 6% with buyers? Loan growth.
LendingClub uses bank funding for prime credits. Having an open pipeline to investors and institutions “allows us to go into near prime and other areas, originate more loans, get more efficient on our marketing spend, more efficient on our servicing,” said Andrew LaBenne, CFO.
At the same time, being a bank that “eats its own cooking,” in LaBenne’s words, makes it a more credible originator.
Servicing creates relationships. Regardless of whether the credit is bank-funded or marketplace-funded, LendingClub always holds onto the customer relationship. That connection represents a renewable asset for the future when customers come back for fresh personal loans to refinance credit card debt and more.
New Products for a Credit-Centric Customer Base
How do you build engagement with customers who initially see you as a means to an end — to bring down the cost of their borrowing, or as a source of ready credit for life goals?
By designing deposit and digital products that tie back to customers’ heavy use of credit and need for periodic refinancing. LendingClub’s offerings are LevelUp Checking, LevelUp Savings, and the company’s DebtIQ personal finance app.
LevelUp Checking, introduced in June, offers LendingClub borrowers 2% cashback when they make their monthly loan payment — on time — from their LevelUp Checking account. The account also pays 1% cash back for debit card purchases for gas, groceries and pharmacy purchases. The account also features unlimited ATM rebates, no account fees, and 1% APY on balances of $2,500 or more.
“When we were looking at launching a checking product, we could have tried a ‘me, too’ neobank offering, like a Chime or a Varo account,” says Elliot. Instead, LendingClub opted for something that would connect to the borrower base and serve as positive reinforcement for on-time payments.
The result: Well over half of the checking accounts opened so far are from borrowers, the rest from savings customers. A high proportion of new checking customers are then applying for a loan in the first 90 days, leveraging the 2% cashback.
LevelUp Savings launched in August 2024, initially with a bonus rate of 5.3% APY if the customer uses direct deposit to add at least $250 per month. (The current bonus level rate is 4.2%.)
The result: Over 85% of savings customers are on direct deposit.
