Business_news LendingClub becomes the first US fintech to acquire a bank


The US-based marketplace lender, which went public in 2014, is acquiring Radius Bank for $185 million in cash and stock,according to CNBC. The acquisition is expected to close within 12 to 15 months, and LendingClub’s CEO Scott Sanborn said during the firm’s earnings callthat the transaction will “pay for itself in two years.” Founded in 1987, Radius Bank has $1.4 billion in assets, and its deposits are FDIC insured.

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Buying Radius Bank will give LendingClub a few key opportunities to bolster its current offerings and venture into new lines of business.

The acquisition will help the fintech expand its lending operations while also cutting costs. Integrating Radius Bank within its business will allow LendingClub to accept customer deposits and in turn gain a new funding source for loans, on top of its marketplace platform.

This could also make the fintech less reliant on third-party institutional money to fund its loans. By moving from warehouse to deposit funding, LendingClub expects to significantly reduce its costs of funding, per Sanborn. Moreover, by leveraging Radius Bank’s license, LendingClub won’t have to pay fees and interest to its current issuing bank partners.

It will also allow LendingClub to offer its users a broader suite of services beyond lending. The fintech’s services are currently focused on lending options — customers have borrowed over $50 billion in personal loans — but diversifying its product suite can help LendingClub to further boost user loyalty. By acquiring Radius Bank, LendingClub automatically gets access to the former’s products, which include checking and savings accounts, as well as credit cards.

Now that it has acquired Radius Bank, LendingClub aims to help consumers manage their cash flow and stay on top of their finances, while also providing them with credit options when needed, per the company. Of note, 90% of LendingClub members surveyed by the fintech reported that they would consider switching to LendingClub as their primary bank, according to Sanborn, which suggests that there is high demand for the wider product suite.

The acquisition could also give LendingClub a new revenue stream in Banking-as-a-Service (BaaS) offerings. In addition to its business-to-consumer (B2C) operations, Radius Bank has also teamed up with several fintech startups, including cash management platform MaxMyInterest and savings app Wallit, to provide them with FDIC insurance for their banking services.

This business model gives Radius Bank another revenue stream, and while it’s unclear what will happen to these existing partnerships under the acquisition, it would make sense for LendingClub to continue this business to further boost its revenue.

This acquisition of a bank by a fintech may be a first in the industry, but we will likely see similar transactions in the future, as becoming a licensed bank remains difficult in the US. So far, fintechs in the US wanting to operate as a bank have primarily gone down two routes. First, fintechs can partner with a BaaS provider, like Radius Bank, in order to access the necessary licensing.

This is the more popular route: For example, German neobank N26 teamed up with Axos Bank for its US venture, and homegrown neobank Chime is working with The Bancorp Bank and Stride Bank. Second, fintechs can apply for their own licenses: Varo Money recently became the first neobank to receive FDIC approval under this approach, following a three-year journey. 

LendingClub acquiring Radius Bank introduces a third strategy on how to become a licensed bank, and while it’s an option that’s likely only viable for bigger players with significant financial resources, we expect there will be more such transactions in the future — especially as established fintechs continue to rebundle finance by diversifying their offering and moving deeper into banking territory.

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