We are a leading technology and analytics company focused on providing online
financial services. We also offered financing to small businesses in all 50
states and Washington D.C. in the United States. We use our proprietary technology,
analytics and customer service capabilities to quickly evaluate, underwrite
and fund loans or provide financing, allowing us to offer consumers and small
businesses credit or financing when and how they want it. Our customers include
the large and growing number of consumers who and small businesses which have
bank accounts but use alternative financial services because of their limited
access to more traditional credit from banks, credit card companies and other
lenders. We were an early entrant into online lending, launching our online
business in 2004, and through December 31, 2015, we have completed over 35.5
million customer transactions and collected approximately 12 terabytes of currently
accessible consumer behavior data, allowing us to better analyze and underwrite
our specific customer base. We have significantly diversified our business over
the past several years having expanded the markets we serve and the financing
products we offer. These financing products include short-term loans, line of
credit accounts, installment loans and receivables purchase agreements (“RPAs”).
We believe our customers highly value our products and services as an important
component of their personal or business finances because our products are convenient,
quick and often less expensive than other available alternatives. We attribute
the success of our business to our advanced and innovative technology systems,
the proprietary analytical models we use to predict the performance of loans
and finance receivables, our sophisticated customer acquisition programs, our
dedication to customer service and our talented employees.
We have developed proprietary underwriting systems based on data we have collected
over our 11 years of experience. These systems employ advanced risk analytics
to decide whether to approve financing transactions, to structure the amount
and terms of the financings we offer pursuant to jurisdiction-specific regulations
and to provide customers with their funds quickly and efficiently. Our systems
closely monitor collection and portfolio performance data that we use to continually
refine the analytical models and statistical measures used in making our credit,
purchase, marketing and collection decisions.
Our flexible and scalable technology platforms allow us to process and complete
customers’ transactions quickly and efficiently. We processed approximately
3.6 million transactions, and we continue to grow our loan and finance receivables
portfolio and increase the number of customers we serve through desktop, tablet
and mobile platforms. Our highly customizable technology platforms allow us
to efficiently develop and deploy new products to adapt to evolving regulatory
requirements and consumer preference, and to enter new markets quickly. In 2012,
we launched a new product in the United States designed to serve near-prime
customers, and in April 2014 we introduced a similar product in the United Kingdom.
In June 2014, we launched a pilot program in Brazil, where we arrange financing
for borrowers through a third party lender. In addition, in July 2014, we introduced
a pilot program for a new line of credit product in the United States to serve
the needs of small businesses.
We have been able to consistently acquire new customers and successfully generate
repeat business from returning customers when they need financing. We believe
our customers are loyal to us because they are satisfied with our products and
services. We acquire new customers from a variety of sources, including visits
to our own websites, mobile sites or applications, and through direct marketing,
affiliate marketing, lead providers and relationships with other lenders. We
believe that the online convenience of our products and our 24/7 availability
to accept applications with quick approval decisions are important to our customers.
Once a potential customer submits an application, we quickly provide a credit
or purchase decision. If a loan or financing is approved we or our lending partner
typically fund the loan or financing the next business day or, in some cases,
the same day. During the entire process, from application through payment, we
provide access to our well-trained customer service team. All of our operations,
from customer acquisition through collections, are structured to build customer
satisfaction and loyalty, in the event that a customer has a need for our products
in the future. We have developed a series of sophisticated proprietary scoring
models to support our various products. We believe that these models are an
integral component of our operations and they allow us to complete a high volume
of customer transactions while actively managing risk and the related credit
quality of our loan and finance receivable portfolios. We believe our successful
application of these technology innovations differentiates our capabilities
relative to competitive platforms as evidenced by our history of strong growth
and stable credit quality.
Our online financing products and services provide customers with a deposit
of funds to their bank account or onto a debit card in exchange for a commitment
to repay the amount deposited plus fees, interest and/or revenue on the receivables
purchased. We originate, arrange, guarantee or purchase short-term consumer
loans, line of credit accounts, installment loans and RPAs. We have one reportable
segment that includes all of our online financial services.
We believe that the following competitive strengths position us well for continued
growth:
Significant operating history and first mover advantage. As an early entrant
in the online lending sector, we have accumulated approximately 12 terabytes
of currently accessible consumer behavior data from more than 35 million transactions
in our more than eleven years of experience. This database allows us to market
to a customer base with an established borrowing history as well as to better
evaluate and underwrite new customers, leading to better loan performance. In
order to develop a comparable database, we believe that competitors would need
to incur high marketing and customer acquisition costs, overcome customer brand
loyalties and have sufficient capital to withstand higher early losses associated
with unseasoned loan portfolios. Additionally, we are licensed in all jurisdictions
which require licensing and believe that it would be difficult and time consuming
for a new entrant to obtain such licenses. We have also created strong brand
recognition over our more than eleven years of operating history and we continue
to invest in our brands, such as CashNetUSA, NetCredit, Pounds to Pocket, QuickQuid,
DollarsDirect, On Stride Financial, Headway Capital, The Business Backer and
Simplic, to further increase our visibility.
Proprietary analytics, data and underwriting. We have developed a fully integrated
decision engine that evaluates and rapidly makes credit and other determinations
throughout the customer relationship, including automated decisions regarding
marketing, underwriting, customer contact and collections. Our decision engine
currently handles more than 100 algorithms and over 1,000 variables. These algorithms
are constantly monitored, validated, updated and optimized to continuously improve
our operations. Our proprietary models are built on over eleven years of lending
history, using advanced statistical methods that take into account our experience
with the millions of transactions we have processed during that time and the
use of data from numerous third-party sources. Since we designed our system
specifically for our specialized products, we believe our system provides more
predictive assessments of future loan behavior than traditional credit assessments,
such as the Fair Isaac Corporation score, or FICO score, and therefore, results
in better evaluation of our customer base.
Scalable and flexible technology platforms. Our proprietary technology platforms
are designed to be powerful enough to handle the large volume of data required
to evaluate customer applications and flexible enough to capitalize on changing
customer preferences, market trends and regulatory requirements. These platforms
have enabled us to achieve significant growth over more than eleven years as
we have expanded both our product offerings and the geographic markets we serve.
We began offering installment loans in the United States and United Kingdom
in 2008 and 2010, respectively, and added line of credit products in the United
States and United Kingdom in 2010 and 2013, respectively. We have experienced
significant growth in these products, with revenue contribution from installment
and line of credit products increasing from 11.7% of total revenue in 2010 to
68.3% of total revenue in 2015. Similarly, total revenue contribution from our
international operations, primarily in the United Kingdom, grew from $40.5 million,
or 15.9% of total revenue in 2009, to $335.1 million, or 41.4% of total revenue
in 2014, before declining to $142.4 million, or 21.8% of total revenue in 2015
due to regulatory changes in the United Kingdom. Due to the scalability of our
platform, we were able to achieve this growth without significant investment
in additional infrastructure, and over the past three years capital expenditures
have averaged only 2.8% of revenue per year. We expect our advanced technology
and underwriting platform to help continue to drive significant growth in our
business.
Focus on customer experience. We believe that alternative credit consumers and
small businesses are not adequately served by traditional lenders. To better
serve these consumers and small businesses, we use customer-focused business
practices, including extended-hours availability of our customer service team
by phone, email, fax and web chat. We continuously work to improve customer
satisfaction by evaluating information from website analytics, customer surveys,
call center feedback and focus groups. Our call center teams receive training
on a regular basis and are monitored by quality assurance managers. We believe
customers who wish to access credit again often return to us because of our
dedication to customer service, the transparency of our fees and interest charges
and our adherence to trade association “best practices.”
Diligent regulatory compliance. We conduct our business in a highly regulated
industry. We are focused on regulatory compliance and have devoted significant
resources to comply with laws that apply to us, while we believe many of our
online competitors have traditionally not done so. We tailor our lending products
and services to comply with the specific requirements of each of the jurisdictions
in which we operate, including laws and regulations relating to fees, loan durations
and renewals or extensions, loan amounts, disclosures and underwriting requirements.
Our compliance experience and proprietary technology platform allow us to launch
new products and to enter new geographic regions with a focus on compliance
with applicable laws and customer protection. We are members of industry trade
groups, including the Online Lenders Alliance in the United States and the Consumer
Finance Association in the United Kingdom, which have promulgated “best
practices” for our industry that we have adopted. The flexibility of our
online platform enables us to rapidly adapt our products as necessary to comply
with changes in regulation, without the need for costly and time consuming retraining
of store-based employees and other expenses faced by our storefront competitors.
·
·
Talented, highly educated employees. We believe we have one of the most skilled
and talented teams of professionals in the industry. Our employees have exceptional
educational backgrounds, with numerous post-graduate and undergraduate degrees
in science, technology, engineering and mathematics fields. We hire and develop
top talent from graduate and undergraduate programs at institutions such as
Carnegie Mellon University, Northwestern University and the University of Chicago.
The extensive education of our team is complemented by the experience our leadership
team obtained at leading technology firms and financial services companies such
as optionsXpress, HSBC, First American Bank and JPMorgan Chase.
Our Growth Strategy
·
Increase penetration in existing markets through direct marketing. We believe
that we have reached only a small number of the potential customers for our
products and services in the markets in which we currently operate. We continue
to focus on our direct customer acquisition channels, with direct marketing
(traditional and digital) generating approximately 52% of our new consumer transactions
in 2015, as compared to 32% in 2009. We believe these channels will ultimately
allow us to reach a larger customer base at a lower acquisition cost than the
traditional online lead purchasing model. Additionally, as our smaller and less
sophisticated competitors, both online and storefront, struggle to adapt to
both regulatory developments and evolving customer preference, we believe we
have the opportunity to gain significant market share.
·
Expand globally to reach new markets. We are building on our global reach by
entering new markets. In June 2014, we launched a pilot program in Brazil, where
we began arranging loans for borrowers through a third party lender. We also
operated a pilot program in China in 2014 and 2015 where we arranged loans for
borrowers through a third party lender but have decided to address the Chinese
market as a service provider and/or analytics provider going forward. We believe
that these countries have significant populations of underserved consumers.
When pursuing geographic expansion, factors we consider include, among others,
whether there is (i) widespread internet usage, (ii) an established and interconnected
banking system and (iii) government policy that promotes the extension of credit.
Our recent pilots in Brazil and China, as well as our launches into the United
Kingdom in 2007 and Australia and Canada in 2009, demonstrate that we can quickly
and efficiently enter and explore new markets.
·
Introduce new products and services. We plan to attract new categories of consumers
and small businesses not served by traditional lenders through the introduction
of new products and services. We have introduced new products to expand our
businesses from solely single-payment consumer loans to installment loans, line
of credit accounts and small business loans, using our analytics expertise and
our flexible and scalable technology platform. In 2012, we launched NetCredit,
a longer duration installment loan product for near-prime consumers in the United
States, and we launched On Stride Financial, a similar near-prime product, in
the United Kingdom in April 2014. In late July 2014 we launched Headway Capital,
a pilot program for a new line of credit product in the United States that serves
the needs of small businesses. On June 23, 2015, we completed the purchase of
certain assets of a company operating as The Business Backer, which now allows
us to provide short-term financing to small businesses throughout the United
States through RPAs. In addition, we intend to continue to evaluate and offer
new products and services that complement our online specialty financial services
in order to meet the growing needs of our consumers and small businesses.
0.62% 
97.62 %