Nimble announces plan to become a digital bank

Nimble first launched as a payday lender in 2005 and offers unsecured, short-term loans. 

Currently, its small loan (between $300 and $2,000 and repaid over a period of between two to four months) comes with a 20 per cent loan amount establishment fee plus a monthly charge of 4 per cent of the loan amount.

Meanwhile, its medium-term loan (between $2,050 and $5,000 and repaid over a period between two to 22 months) comes with an application fee of $400 plus a 47.6 per cent interest rate p.a. (65.6 per cent, comparison). 

However, the lender has said that it will launch a new, longer-term unsecured loan product by the end of July, which will be for loans of between $5,000 and $25,000, and is also working on building a “flexible, revolving line of credit product” at “rates far more competitive than its current short-term finance products”.

The payday lender has also said that it is seeking a restricted banking licence to enable it to offer more finance products. 

While details of the new Nimble products have not yet been released, it has been reported that the lender would also look to branch into car loans and – if it secures a banking licence – deposits and mortgages, too.

Nimble to ‘transition away’ from payday lending

Nimble chairman Ben Edney commented: “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.

“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,” he said.

According to Nimble CEO Gavin Slater, the “high cost of capital” was one of the key drivers for the lender’s wish to move out of the short-term finance market and become a digital bank. However, he noted that the payday lending market has also come under a lot of criticism for the high interest rates associated with the sector.

Indeed, the financial services regulator has also had a keen eye on the payday lending sector in recent years, particularly around fees charged to consumers. 

Mr Slater, a former NAB executive who joined Nimble after heading up the government’s Digital Transformation Agency, commented: “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.

“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.”

He added that he would therefore “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”.

Mr Slater said that the company has a “high degree of confidence” that it can offer new products to its market base at better rates and extend its credit risk assessment experience into 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,” Mr Slater said.

The former NAB executive outlined that as half of Nimble’s customers are “young Millennials aged between 20-30 years old” and that given the “backdrop of changing consumer banking habits”, the company believes it can achieve its aspirations of becoming “a world-class digital bank.”

“That’s our new focus and we believe we have the team, technology, brand and strategy to take on the banks and other providers to make it a reality,” Mr Slater concluded.

Several neo-lenders have looked to take advantage of the Australian Prudential Regulation Authority’s (APRA) new restricted authorised deposit-taking institution (RADI) framework, which first launched last year with Volt Bank.

The restricted licence enables eligible entities to conduct a limited range of business activities for two years while they build their capabilities and resources.

Specifically, a RADI enables entities to hold up to $2 million in deposits (of less than $250,000 each), while also adhering to strict rules regarding the level of tier one capital, assets and liabilities and the assets held on the balance sheets of licensees.

Xinja is currently the only operational RADI in Australia (after Volt Bank received its full banking licence earlier this year).

[Related: Nimble penalised following ASIC probe]