A Conversation with Jeffrey Meiler, Founder and CEO of Marlette Funding
Jeffrey Meiler is the founder and CEO of Marlette Funding. He spent the majority of his career in financial services including Barclaycard and Citibank. Prior to starting Marlette Funding, he was the President and founder of a start-up energy supplier which was bought by NRG, a top power company in the U.S., after just three years.
Marlette Funding, LLC, is a national personal loan marketplace based in Wilmington, DE. Marlette Funding was founded in August 2013 and launched its first innovative online installment loan product offering, Best Egg, in March 2014.
1. There is a lot of activity in the personal loan space with peer-to-peer platforms and a host of alternative lenders attracting a lot of attention. How do you look at the market opportunity and how is Marlette positioned?
Peer-to-peer players are “disrupting” the lending industry with technology and new opportunities for investors. Marlette was started because we saw the financial crisis leaving many consumers without attractive options to consolidate and pay off debt. Regulatory changes, banks pulling back on lending and increases in the cost of capital created a perfect storm for innovative nimble players that could calibrate to the new reality and solve this problem.
Marlette is the fastest growing marketplace lender, topping over $1B in loans in just 16 months. Today, we focus squarely on helping consumers pay off debt so they can begin to build their nest egg. Our product, the Best Egg installment loan, makes getting a loan easy and fast through a seamless online process. We offer rates starting as low as 4.99% with three and five year re-payment terms and funds are delivered to our customers in as little as one day.
2. Marlette’s management team has extensive experience in the credit card industry and, unlike many start-ups, the company is headquartered in Wilmington with most of the large card banks. Do you feel that is a differentiator and how does Marlette benefit from its strong roots in cards?
I would say the composition of this team is a huge advantage over our competitors and being in Wilmington, DE gives us great access to a superb talent pool. We not only have the technology “know-how” and experience in the start-up world, but the practical business experience to build successful financial services businesses. The entire executive staff and bios can be found here: http://www.marlettefunding.com/about/#leadership
In the “plastic loan business”, this team built world-class marketing and analytical infrastructures and managed some of the country’s top co-branded partnerships. We employ a similar approach in the installment loan business—leveraging partnerships, an aggressive test and learn approach, advanced analytics and automation to shorten the learning timeline.
3. How do you think about both the opportunity and the risk associated with personal loans given some of the challenges experienced by larger banks with personal loan books during the recession?
We observed that after the financial crisis, banks were forced to significantly change their lending practices. In the years that followed, consumers with fewer options were forced to finance purchases predominantly on high rate credit cards that perpetuate debt. We entered the market with an alternative– a fast and easy loan with low rates, fixed payments and a clear path to paying off debt.
As we see it, there were two big problems that stressed the installment loan product in the last downturn. Fortunately, both are addressed today and our nimble business model is much more oriented towards monitoring and calibrating quickly.
The first problem was one of adverse selection. Recall with the real estate bubble pre-recession, refinancing and HELOCs were the most attractive options for financing or debt consolidation. Generally, people only applied for an installment loan if they did not qualify for the alternatives and therefore the candidate pool was not the most attractive. In today’s world, refinancing and HELOCs are much less readily available and the simple and seamless process of online lending is attracting a much better quality customer. At Marlette we target and attract prime customers. Our average FICO score is 715.
Second, post-recession what became clear was that a person’s debt-to-income (DTI) ratio was directly linked to the ability to repay and was not considered strongly enough in the decision process. As such, today Marlette takes extra precautions to verify an applicant’s income and has specific algorithms to predict the applicant’s ability to repay. We believe that the correction of both circumstances positions us for much greater success should the economic winds change again.
4. How do partnerships fit with into Marlette’s strategy and what form could partnerships take – product, platform, co-branded?
First, partnership is part of our DNA. There is no one who has the depth of partnership experience that our team has, especially in the personal loan space. Most of us spent a substantial part of our careers in partner-oriented organizations such as Barclaycard and NRG. Our goal is to generate 50% of our business through partnerships by 2018 and with this in mind, we built a flexible platform that caters to the unique needs of partnership. We are able to co-brand or white label products and the end to end customer experience. Partners can play a spectrum of roles in marketing, servicing and loan ownership depending on their goals. What’s really attractive is that the model can easily evolve over time as their needs change.
5. What types of partners would be strong candidates to capitalize on the addition of a personal loan offering? How do you address or think through the threat of cannibalization of their flagship credit card partnership product?
Attractive partnerships for us span many segments from travel and entertainment to membership organizations to traditional banks. The key for us is partnering with organizations where we can leverage brand, value, data and distribution as differentiators. We know from our experience in the card industry that the loan product will be a great compliment for customer/member loyalty programs and paid membership organizations who seek compelling products to provide to their customers. We also believe that traditional banks are great partners where we can either provide or supplement their loan offering. We offer a low risk, low cost, quick way for banks to expand or get back into the market and deploy their unused deposits.
Growth and awareness of the product has increased dramatically over the past 12 months and will continue to do so. Organizations are recognizing that if they don’t supply the product, someone else will. Cannibalization has not been a huge concern for partners. The product is positioned to consolidate debt in the wallet and free up partner credit card lines to enable purchasing which is how partners typically make money. Partners understand the demand and growth in this space and see it as a value-added product for their customers.
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