Small-dollar loans made simple

September 10, 2018 | GET MORE : Future of Banking

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U.S. Bank worked with customers to develop its new digital and transparent small-dollar loan product.

U.S. Bank recently launched U.S. Bank Simple Loan, a new small-dollar loan product designed to help customers deal with unexpected or short-term cash needs with a transparent, easy-to-understand installment loan.

Simple Loan was developed in recognition of the ongoing market need for small-dollar loans, and U.S. Bank worked with federal regulators to create a loan product that customers could understand and trust.

Eligible U.S. Bank checking account customers can apply anytime through online or mobile banking, for loan amounts ranging from $100 to $1,000. Customers get quick decisions and immediate access to funds, if approved.

Lynn Heitman, executive vice president, Consumer Banking Sales and Support, led the efforts to bring Simple Loan to market and answered some questions recently about how it was developed.

Why did the bank think this was an important product to offer customers?

Heitman: Our goal is to be there for our customers in the moments that matter the most. Earlier this year, the Federal Reserve released a study reporting that about 40 percent of U.S. adults said they would not be able to cover a $400 unexpected expense or would cover it by selling something or borrowing money.  Among those not able to pay the expense in full using cash or savings, 29 percent would have no other means to be able to pay for the expense.  

When we piloted this product, what we heard from our customers is that this was exactly the type of situation people were finding themselves in. All too often we hear stories of a family whose car breaks down, but they cannot come up with the $500 to get it fixed. So, they have no access to their car and cannot get to work. Without being able to work, they can’t earn the money to pay for the repair. And the cycle continues. We hope this can help bridge that gap.

Why did the team at U.S. Bank focus so much on this product being transparent and simple? 

Heitman: It was the right thing to do for our customers. When we piloted the program last year, we heard from our customers how much they appreciated knowing what their options were and exactly what the payment terms for the loan would be. Plus, we share all the details on our website. And it was important to us that we were taking the steps to help customers understand they may have other options that could meet their needs. So, at three different points in the loan application process, we inform customers about other options.

You mentioned that you did a pilot. What did you learn through that? 

Heitman: We initiated a pilot in late 2016 for a small-dollar loan to learn about the consumer demand for this type of product. We got some great insights from the pilot, including interesting customer responses on how and why they applied for the loan. For example, several customers told us they applied for a loan to bridge a cash flow gap while also helping improve their credit ratings. We wanted to learn about things such as consumer demand for this type of product, average loan amounts, booking rates and what customers thought of the overall experience. For instance, overwhelmingly we heard from our customers that they found the loan and its pricing structure easy to understand. We used that data to refine the product for a full rollout, including going to a fully digital application process to best meet customers where they want to bank. It’s also important to note that throughout our testing and development, we worked with our federal regulators to ensure we met all federal guidelines and to improve the product and experience for customers.

You describe this as a first-time, new product for a national bank to offer. How so?

Heitman: Simple Loan offers simplified pricing with a consistent payment schedule over three months. The payment schedule is longer than other products in the market, the terms are easier to understand and are fully detailed on our website. Also, by using this product, our customers will be building their credit. 

Where can people learn more?

Heitman: We have created a site designed to provide customers with additional information about Simple Loan, and it provides guidance on the loan application process. In addition, our branch employees are knowledgeable about our loan offerings and are always happy to talk to their customers about the products that can best meet their needs.

What are the bank’s goals for Simple Loan?

Heitman: To do the right thing for our customers, and to be a trusted choice for them. In fact, this is the first product in which the customer can only apply via a digital channel.  We are upfront about the costs for the loan and highlight that other credit options in which customers may also be eligible are available. It’s meant to be a simple, transparent option for our customers when they need it most.