Garnet Capital Advisors Blog

Banks are in a unique position to step out of their comfort zone to remain competitive in the loan market.

The internet is exploding with a host of alternative lenders promising to lend to the consumer or the small businessperson without all the obstacles typically met at the big banks.

And banks are certainly taking notice.

From mortgages, to student loans, to small business loans and beyond, the hoards of internet-based lenders are offering consumers quicker turnaround times, better rates (sometimes), lower fees, and less stringent approval criteria.

How are banks supposed to remain at the competitive forefront against these alternative lenders?

One trait that banks still have on their side is convenience. While consumers are still on the prowl for the attractive benefits alternative lenders offer such as quick loan approvals and less strict lending criteria, there's still something to be said about a one-stop-shop, real world brick and mortar institution, for loans and other financial services - something that banks still trump over alternative lenders.

Sure, just about anyone can borrow funds at a competitive rate from many online lenders like OnDeck, Prosper or Fundera. Home buyer hopefuls can arrange for a quick mortgage loan with lenders like Quicken Loans or Lending Tree. Small business owners can get quick cash for expansion and other business needs thanks to online lenders like Rapid Advance Funding Circle and Kabbage. But banks still offer all the right products under one convenient roof and at rates that are often more attractive.

It all comes down to simplicity and convenience. Consumers want all their options under one roof without having to uphold financial relationships with various firms. A high quality product is important, but it's only part of the equation. Customer service and convenience are part of the whole picture.

But even though banks want to lend, the regulatory and oversight environment that they operate in makes it challenging for consumers to get approved for a loan. From stellar credit scores, to documentation of everything on an application, to large amounts of collateral, there are a number of hurdles that consumers must overcome in order for banks to lend a financial hand. Banks have been put through a nightmarish regulatory maze in the past few years that affects their ability to lend. As such, consumers have been looking for an alternative way to get their hands on the money they need. Alternative lenders are capitalizing on this fact, and are enjoying a plethora of growth opportunities that banks have left on the table.

Unless big banks step up to the plate to compete with the internet-based lending phenomenon, they could be left in the dust. These new lending companies are putting a lot of pressure on banks to step out of the box and try new methods they previously wouldn't have even considered.


Alternative lending companies are putting pressure on banks to offer loans that are convenient, easily approved for, and offer attractive rates.

Banks can't afford to ignore this significant lending game-changer. But instead of seeing these internet startup lenders as their competition, there's another option: teaming up with them. Banks have an opportunity to work with these alternative lending companies to boost revenues, leverage well-developed risk management platforms, and expand their market share.

The view of partnering up is not just one-sided: alternative lenders also think that partnering up with banks makes more sense than just competing against them. Internet marketplace lenders still respect the positive reputation that banks uphold with their loyal clients. They're also keenly aware that banks can offer them access to a large customer base at a lower cost of origination.

It could be a win-win scenario.

So what would this new partnership look like?

For starters, alternative lenders can get referrals from banks for consumers that don't meet bank requirements for approval. The bank in turn can receive a referral fee from the alternative lender, while still retaining all of the customer's remaining business.

Banks and alternative lenders can also work together to scope out new loan opportunities. Banks can loan out to consumers who meet its stringent criteria via an internet portal whitelabel product, while nonbank lenders can offer loans to non-bankable consumers. This can be an attractive growth area for banks that are looking to increase their loan products to students, consumers and small businesses.

Integration can also be key to profitably adapting to the explosion of the internet marketplace economy. alternative loan market. Since banks don't stand to make much money on loans less than $100,000, it might make more sense to use alternative lenders for their origination and risk management platforms in an effort to improve customer experience, reduce costs, and simplify the loan process. This approach can help banks focus more on origination and less on the back office operations.

Garnet Capital - Partnering With Alternative Lenders and Big Banks

At Garnet Capital, we have decades of experience in serving the banks and we understand and appreciate the convenience and level of service that traditional banks offer their loyal clientele. At the same time, we also appreciate the convenience and products that alternative lenders are offering consumers.

With both teams offering great products and services, it makes more sense to partner up rather than compete. At Garnet Capital, we can help banks adapt to this change in the lending game by channeling a partnership with these alternative lenders.

To find out how Garnet Capital can help banks stay competitive in this revolutionary loan market, contact GarnetCapital.com today.