LendingClub receives final approval for its acquisition of Radius Bank

It was quick. After receiving preliminary approval from the OCC on December 30, Loan Club announced today that they have now been fully approved to acquire Department bank. The transaction is expected to close on or around February 1.

Here’s a statement from LendingClub CEO Scott Sanborn about the approval:

This is a transformative acquisition for the company and a watershed moment for the industry as we become the only full-spectrum fintech market bank in the United States. The benefits to customers of this acquisition are even clearer now that COVID has accelerated Americans’ transition to digital banking. As the only full-spectrum fintech marketplace bank, LendingClub will be able to use our technology and data-driven platform to deliver new products and services to our millions of members that will help them both pay less when they borrow and earn more when they save. By combining with Radius, we will create a category definition experience that will also dramatically improve the resilience and revenue trajectory of our business.

Thus, LendingClub Bank will soon be born. It’s an exciting time for the company as it becomes the first fintech lender to purchase a digital bank. Although we have seen many fintechs looking to become banks by applying for a license, LendingClub has opened up a new path in its approach. And with less than 12 months between the announcement of the acquisition and its approval, the process appears to be faster. LendingClub has worked with banks for years and I know they have done some serious compliance work after the fiasco 2016 so that’s probably held them high with this application process.

Now LendingClub has paid $ 185 million for Radius Bank, but they are also getting a fully functioning digital bank that integrates with their existing operations. And like most digital banking offerings in 2020, Radius Bank has seen strong growth. When they announced the acquisition last February, they shared that Radius had $ 1.4 billion in assets and that today Press release that number rose to $ 2.4 billion.

One of the losers in this new arrangement is Web banking. They are the source of nearly all of the $ 60 billion in LendingClub loans to date and shortly after the deal closes, they will be removed from the process as LendingClub Bank issues the loans. It will be less confusing for consumers and save LendingClub a lot of money.

Along with the press release, there is also a plus detailed blog post on the acquisition that is worth reading. Mention is made of the Founder Savings Account, it is the high yield savings account that will be offered to existing LendingClub investors. Unfortunately, there are no details on this account yet, but we do know that it will arrive shortly after the acquisition ends. I am very interested to see what else LendingClub is doing for retail investors. A high yield savings account, while moderately attractive, is not innovative. Hope we see some revolutionary products from this side of the business.

For their borrowers, LendingClub will now be able to offer a full range of financial products beyond the personal loan. They have over three million borrowers and 79% said they would likely open a checking account if LendingClub offered rewards related to helping them pay off their personal loans. This is another area where we could see real innovation.

LendingClub has taken a big step towards financial health in recent years and this is mentioned several times in the blog post announcing the acquisition. We can therefore expect this to be a good deal for consumers as the combined company rolls out new initiatives. I am very interested to see what new products LendingClub will offer. I hope and expect this will include several new offerings for individual investors. Let’s stay tuned on this.

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