US Banks Can Learn from Referral Scheme Enacted in the UK


This week a new referral scheme, that has been in the works for two years, launched in the UK. It was an initiative started by the UK government and aims to expand access to credit to small businesses. The way it works is pretty simple. If a small business seeking a loan is rejected by any of the nine largest UK banks, they must refer the small business to an aggregator platform, who in turn will provide options to the borrower from various online lenders. The aggregators are currently Funding Xchange, Business Finance Compared and Funding Options.

While this kind of government initiative is unlikely to happen in the US, it’s still relevant when we talk about bank partnerships and referring customers. A bank partnering with an online lender by forwarding leads is a great way for banks to ease into the online lending industry while booking revenue on the leads. For some banks, this could mean forwarding customers where they don’t offer a good product fit or forwarding rejected applicants that don’t fit the bank’s risk band.

A perfect example of a bank looking to better serve all customers, regardless of credit profile is the recent partnership between Regions Bank and Avant. Regions Bank lends to prime borrowers by using Avant’s technology and underwriting and the customers who are denied are directed to Avant’s website which focuses on near-prime borrowers.

A partnership involving referrals is a win-win for the bank and the platform. Most importantly the customer is being better served by their bank. While there have been many bank partnerships announced over the last year we believe that 2017 will be the biggest year yet for bank partnerships with fintech companies.

If you’re interested in learning more about bank partnerships, LendIt, a sister company to Lend Academy is hosting a LendIt Forum titled Taking on Current Challenges to Bank Partnerships and More. It is a free webinar and takes place on Wednesday, November 16 from 2:00 PM – 3:00 PM Eastern. Some topics that will be discussed are:

  • Business structuring and decisions that address “true lender”, Madden v. Midland and other challenges
  • Emerging platform alternatives to direct lender and bank partnership models
  • Different ways fintech companies and banks can partner
  • Impact of recent litigation and enforcement actions

Speakers include Manny Alvarez, General Counsel & CCO of Affirm, Richard Neiman, Head of Regulatory & Government Affairs at Lending Club and Kevin Lewis, Head of Business Development at Avant.

You can view more information and signup on the LendIt website.