What is MoneyLion and how does it make money?
MoneyLion is a private fintech company established five years ago that provides lending, financial advisory and investment services to consumers. Founded in 2013, MoneyLion’s the target market is 70% of American consumers, a group that has less than $ 2,000 in savings on average. The company’s objective is to optimize the management of consumers’ money and savings while boosting their credit. Over 93% of MoneyLion Plus members are first-time investors, for example business report published in March 2018.
The company earns money through its lending activity, generating leads from users on its site, and its monthly subscription service. People who use MoneyLion’s services start out as visitors, choosing to either use the platform for free or purchase its premium consumer services through premium membership and loan applications.
The founding of MoneyLion
The company was founded in New York City by a team of tech specialists and financiers, who developed the company’s analytics and machine learning technology to provide personalized advice to individuals based on their spending habits. MoneyLion also provides consumers with access to small loans to help them manage fluctuations in their monthly income and expenses.
Customers receive points through a rewards program for actions such as connecting a bank account or reducing the use of their credit. MoneyLion’s system mimics points-based credit card programs like Chase Ultimate Rewards or Amex Membership Rewards.
Founders and Funders
MoneyLion is headed by co-founder and CEO Diwakar Choubey, who previously worked on Wall Street, where he held executive positions at companies such as Goldman Sachs, Citadel and Barclays Capital. CIO Pratyush Tiwari and CTO Chee Mun Foong are also co-founders. With the aim of extending banking services to consumers via the mobile phone, MoneyLion hiring veteran of the financial industry, Jon Stevenson, formerly head of alternative investments at Stifel Financial at the head of its banking and wealth management division.
The company operates from four offices around the world, including its headquarters in New York, San Francisco, Salt Lake City and Kuala Lumpur, Malaysia.
The firm has raised five rounds of funding totaling $ 269.5 million, with the last round of Series C bringing in $ 160 million in July 2019, for a valuation close to a billion dollars. Among its main investors are Edison Partners and Greenspring Associates. Other funders include Fintech Collective, Grupo Sura, and Sanhua Capital.
These funds have helped MoneyLion compete with large and small fintech competitors. MoneyLion’s profits and estimated market value are not being disclosed.
The platform has a 4.6-star rating on TrustPilot, a popular consumer review website. Negative reviews criticize the company for poor customer service, slower-than-promised fund transfers, and other account issues. The growth of the platform, however, has been rapid despite these complaints.
Loans become a key factor
MoneyLion generates revenue through its lending business, where the company has amassed over 4 million members since its launch in 2013.The company has managed to generate various accolades, including the best personal loan application, according to PYMNTS.com.??
In addition to providing tools to track spending, savings, and manage credit, the company also offers low-cost borrowing and investing services through its MoneyLion Plus subscription. This service offers loans of up to $ 500 at an annual percentage rate of 5.99% or less without a credit check, payable over 12 months. The company is able to offer low rates by using brokerage accounts as collateral and the loans can be funded within 15 seconds of an application, according to MoneyLion.
MoneyLion Plus subscription service
Launched in December 2017, MoneyLion Plus consolidates investment, loan and checking accounts into one subscription-based membership. MoneyLion automatically withdraws $ 79 from a consumer’s account per month, depositing $ 50 into their investment accounts and taking a $ 29 monthly fee. Users get $ 1 in cashback for each daily login, which means users who remember to log in every day and scroll through a few screens essentially get the service for free. Its managed investment account transfers the saved money to an ETF wallet and does not charge a management fee.
Lead generation service
The startup also derives income from its lead generation activity, thanks to which it recommends other financial service offerings to consumers who can benefit from it.
Partners include related businesses such as credit monitoring companies. MoneyLion also has sponsorship agreements with organizations such as NASCAR. Its partnership with NASCAR has provided cash back to users who have made purchases on NASCAR tickets and purchases on its tracks.
MoneyLion is tackling a growing number of consumer fintech platforms, including digital finance companies LearnVest, Betterment, and Intuit. Meanwhile, as new tech startups rock the traditional banking industry, older players go on the defensive.
For example, in August, JPMorgan Chase launched a free app called “You Invest,” targeting Millennials who trade on their mobile devices. Other established industry leaders have followed a similar path, with companies like Fidelity Investments and Vanguard Group cutting some of their fees to zero, according to the New York Business Journal.