Nimble pulls out of payday lending while ASIC clamps down

Fintech Nimble will exit its high interest, short-term loans business this year at a time when the sector is under heightened scrutiny from the corporate watchdog.

The Australian Securities and Investments Commission (ASIC) released a consultation paper yesterday revealing plans to use new product intervention powers in the short-term credit industry.

The regulator noted "significant consumer detriment" could arise when this type of credit is provided at a high cost to vulnerable consumers, citing many instances of negative impacts including one case where fees added up to 990 per cent of the original loan amount.

ASIC said it would be targeting two Gold Coast-based companies Cigno Pty Ltd and Gold-Silver Standard Finance Pty Ltd, but clarified any company could come under the intervention's scope if they operated under the same business model.

"Sadly we have already seen too many examples of significant harm affecting particularly vulnerable members of our community through the use of this short term lending model," said ASIC Commissioner Sean Hughes.

"Consumers and their representatives have brought many instances of the impacts of this type of lending model to us.

"Given we only recently received this additional power, then it is both timely and vital that we consult on our use of this tool to protect consumers from significant harms which arise from this type of product."

Nimble is not implicated in ASIC's intervention call and its announcement came out a day before the regulator's release. ASIC had previously welcomed the new laws to protect financial services customers on 4 April, and on 26 June it announced consultation had begun on the proposed administration of the new powers.

Nimble CEO Gavin Slater said the high cost of capital was one of the key reasons the fintech would transition out of the short-term finance market.

"My time at Nimble has made it very clear to me that thousands of hard-working Australians are suffering from financial exclusion from the mainstream banking system and this issue can have incredibly negative impacts on their lives during times of need," Slater said.

"While short-term lending has come under a lot of criticism for the high interest rates associated with the sector, the reality is that the need is real and we would like to offer more affordable rates by reducing our cost of capital.

"I would personally welcome engagement from Government, banks and industry superannuation funds to support our efforts to lower our funding costs so we can pass that benefit onto our customers."

He emphasised Nimble's responsible lending policy and its flexible approach to collections result in far fewer defaults and write-offs than many might expect for the industry, with the business achieving a net promoter score above 50 per cent which is well ahead of the major banks and many non-bank lenders.

"Over our 14 year journey, our data driven credit risk engines have allowed us to make better lending decisions through quick and highly personalised cash flow assessments," Slater said.

"This situation provides us with a high degree of confidence that we can offer new products to this market segment at better rates than ever before and extend our expertise in credit risk assessment to other customer groups.

"While we transition from the payday lending market, we are building a strong suite of products which will eventually fill this void."

As it transitions out of the high interest short-term loan segment, Nimble will be launching a new unsecured loan product by the end of this month for customers interested in accessing between $5,000 and $25,000.

In addition, the company is building a lexible, revolving line of credit product which could be offered at rates that are more competitive than current short-term finance products.

"Recently the business recognised that its expertise and experience in the digital lending and banking arenas could be applied to successfully launch other complementary products, and so redefined the vision, strategy and purpose of the company," said Nimble chairman Ben Edney. 

"Nimble now has aspirations to become a full service and branchless digital bank with the planned new products representing the first step in this strategy.  We are also in the process of completing due diligence around applying for a restricted banking licence."

Nimble claims to have transformed the way Australians borrow money by developing a unique, data-driven approach to assessing loan affordability within minutes and transferring finance to approved customers within 60 minutes.

To date it has provided more than 1.4 million small to medium-sized loans to more than 300,000 Australians.

More specifically, it has facilitated over 120,000 home moves and improvements, kept over 75,000 vehicles registered, on-the-road and insured, and covered the cost of more than 40,000 unplanned dental, medical and veterinary expenses.

Business News Australia