Storefront lender OneMain pushes further into digital

The subprime installment lender OneMain Financial, whose first branch opened before the 1918 flu pandemic, historically did most of its business in person.

That changed quickly in 2020, with what proved to be a well-timed rollout of an online lending platform just before the COVID-19 pandemic forced the world into lockdown. Now OneMain is adding more digital tools through a recent agreement to acquire a financial wellness app called Trim, which helps customers shrink their bills, automate savings and cancel subscriptions. The nonbank lender is also rolling out a credit card later this year.

The goal for OneMain — whose 2.3 million customers make it the largest installment lender in the U.S. — is not to become a digital-only lender. That is the approach that newer fintech competitors, such as Upstart, Prosper and Avant, have adopted.

Rather, OneMain is committed to offering customers an in-person experience through its more than 1,500 branches in 44 states — but also giving them the option of completing some or all of the process online or by phone.

“Our future is not a digital pure play,” CEO Doug Shulman said in a recent interview. “Our future is to be the leading nonprime lender and have an omni-channel experience, which allows the customer to do business with us the way they want to do business.”

OneMain may have trailed its digital-only competitors some years ago, Shulman acknowledged. While the company was investing heavily in back-end capabilities, it did not launch a full digital experience for borrowers until last year.

“It was either prescience or good luck, but we had the ability to start originating digitally at the beginning of 2020,” Shulman said.

The behavior of OneMain customers has since shifted heavily, with 46% of its new loans closing without a branch visit in the first quarter, up from 13% in the first quarter of 2020. OneMain’s net income rose to $413 million in the first quarter, up from $32 million a year ago, when a massive build-up of reserves to prepare for possible loan losses weighed on earnings.

OneMain was not “starting from zero” in investing in digital capabilities, but it has been more aggressive lately in adapting to consumers’ shifting preferences, said Jefferies analyst John Hecht. At the same time, he added, maintaining a branch network gives people who prefer in-person experiences an option and is a critical source of marketing to new customers.

Even consumers who do not use OneMain branches may see the company’s signs and do a Google search, Hecht noted. “And then they facilitate the loan process online.”

OneMain is one of numerous traditional subprime lenders that are trying to find the optimal mix on physical and digital distribution channels. Other examples include Oportun, which announced plans in February to close 136 retail locations, and the tax-prep chain H&R Block, which offers a limited menu of financial products and plans to reduce its physical footprint over time.

OneMain offers installment and auto loans ranging between $1,500 and $20,000, with a maximum annual percentage rate of 36%. It focuses on consumers who typically have credit scores below 700, which may shut them out of traditional bank loans.

Evansville, Indiana-based OneMain emerged from the 2015 merger of two storefront lending chains: Springleaf Financial and OneMain Financial, which was previously owned by Citigroup.

Shulman was commissioner of the Internal Revenue Service from 2008 to 2012 before joining OneMain in 2018. He said the Trim acquisition will help customers improve their financial health by helping them negotiate their cable bills, for example.

Adding Trim’s employees will also give OneMain more expertise to build new digital tools for customers, he added.

The acquisition could help OneMain collect more customer transaction data, which it would then be able to use for underwriting and marketing. The financial wellness app also figures to lead to higher levels of customer engagement, increasing the chances that users will turn to OneMain for their next loan.

Later this year, OneMain will launch a credit card aimed at both existing customers and new prospects, including those who might not qualify for larger OneMain loans. The card, which will run on Mastercard’s network, will “reward good payment habits and reinforce credit building behaviors,” Shulman said. OneMain declined to share more details prior to the card’s launch.

The company has hired Nick Clements, formerly of LendingTree and Barclaycard, to run the credit card business.

“It makes sense for a company like OneMain that has lots of longstanding relationships with borrowers to say: ‘Hey look, you’re familiar with our installment loan product, but you know, we can offer you some revolving credit products too,’ ” said Hecht, the Jefferies analyst.

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