😞Is your bad credit stopping you from getting a quick loan for an unexpected expense?

Worry not 😀- Lending Stream is here to help. Our short-term loan is designed to give you a quick financial boost, with the flexibility to repay in over 6 or 12 months. We have already helped over a million Brits with a fully-online instant-decision loan that can get to your bank account in seconds.

Let's understand the Product 💡

Problem that it solves:

Its a short term loan product designed mainly to lend small sum of money to people with bad credit history, who find it hard to get it elsewhere quickly. It also is helpful for good/fair credit people when they need the cash urgently.

People refer to such loans as Payday Loans (an older term which isn't right in the current context), Short term loans and bad credit loans. These products are regulated by the Financial Conducts Authority (FCA) under High Cost Short Term Credit (HCSTC) category. These customers are majorly categorised by their credit worthiness and their bankability - near sub-prime and non-prime.

Basic features:

1. Fully online product where-in you apply online through our website that takes a few minutes.
2. Instant credit decision (a few seconds) and Superfast payout (within 90 seconds).
3. Clear loan terms - daily interest rates and late fees.
4. Easy EMI repayments over 6/12 months.
5. Option to borrow multiple times (2 loans max at the same time).
6. Very expensive form of borrowing.
7. Available only for UK residents who are 18+, employed and have bank account & a debit card.

Other ways to solve the problem that it solves:

1. Check if the expense can be deferred
2. Asking for money from Friends and family
3. Claim any state benefits or grants that you're entitled to
4. Mainstream products like bank loans, credit cards, credit unions, bank overdrafts, guarantor loans, home collected loans, pawn broking etc.
5. Our competitor products like Moneyboat, Cashfloat. etc.
6. Unauthorised and Illegal money lenders

Product Stage

PMF achieved many years ago. Undergoing mature scaling now.
Leader in the market.

Core Value Proposition

Solve urgent cash needs for UK residents by lending them smaller sum of money within the next few minutes (in most cases) by assessing their credit worthiness and affordability. The product is meant mainly for bad credit customers who don't get credit easily elsewhere. Secondary set of customers are people with good/fair credit but looking for urgent cash that they can pay back quickly. It's to be repaid back in 6/12 months through weekly/monthly instalments.

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Understanding the Users

I've worked on this product, so I have access to data from primary and secondary research that I/my team conducted.

For Primary research - I and my team spoke to a few customers with different application attributes over audio calls/video calls. We also ran surveys to a set of users who're in the market to get short-term loans using third party providers.

The user research objectives and questions(not exactly what we asked but more or less same) are documented here.

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Understanding the ICPs

I have focused on the most important target customers (not all) to ensure we focus on the the right audiences.

ICP Table

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We have multiple users of a product and not all of them can be our ICP for whom we make our strategies, we need to prioritize.
(ICP prioritization table)

Based on the above table the prioritization preference for the ICPs would be ICP 1>ICP 4>ICP 2>ICP 3

So, we'd devise our strategy mainly based on ICP 1 and ICP 4. These 2 ICPs combined cover over 70% of our current customer base with a potential to strech ICP4 further.

A few interesting insights on our ICPs:

• A good share of our ICPs are earning between £1500-£3000 per month and are working for NHS and superstore chains like Tesco, Sainsbury.
• Over 50% of them stay with their parents or are tenants.
• They have very low financial resilience as they have almost no savings with not so high salary. They're also less financially responsible.
• They are located more densely in expensive geographies like Central & Greater London, Manchester, and Glasgow and Belfast.
• They usually have no savings to get them over an unplanned expense like appliance repair, car repairs etc.
• They don't like borrowing from family & friends and have thin credit file or bad credit profile, therefore banks/credit card debt is not accessible.

What they need in these situations is someone who can lend them money without social impact. They have a steady income that they can use to repay the loan back. It's for a shorter term, so interest rate isn't that big of a concern for a large share of users.

Business should focus on the core value-prop of lending to wider audience with quick disbursal. To be able to accept larger audience means higher credit risk which means, the interest rate needs to be high.

Keeping that in mind, the business should focus on delighting more users with their fast service catering to a large audience rather than worrying about a set of customers who find it very expensive. This is a need based product, so when in need, people would come even if it is expensive as there are limited solutions available for the problem.

Understanding the Market

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An interesting thing about our competitors is that we're all competing for a common near sub-prime and non-prime audience with very similar product, placement, price and promotions.

For example:

• All our key competitors have the same product - high cost short term credit (HCSTC), the main differentiator in some cases are duration of loan, which isn't major too.
• All our key competitors rely heavily on leads generated by brokers plus SEO. Some of us do a little bit of PPC too but again on similar search terms and audiences. The major differentiator is how optimally we buy the leads from partners, what kind of innovation can we bring to the process and seo performance.
• All our key competitors have similar pricing with minimal difference like 3 out of 4 competitors have same interest rate and fees while one has slightly lower interest rate or fees. We play with loan durations as tests to see if we can offer more varied terms but it is a very effort heavy task and takes time to further conclude due to the nature of the product (bad debt, cltv etc.)
• Due to highly negative market perceptions of the products, no-one focuses on Brand awareness as it leads to more negative PR. Most companies in our market have shut down due to pressure of regulatory framework and historical complaints redressal. Branding activity would result in more recall with historical customers, which would lead to more redressal amount.
  
  Therefore the most important differentiators among the competitors are:
• Underwriting engine efficiency
• Customer retention and CLTV
• Future proofing efforts against redressal
• Monetization of rejected leads
• Website design and UX
• Efficiency of broker channel and SEO with some scope of improving customer acquisition thorugh other channels like PPC and social.

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​Now it’s time for some math, calculate the size of our market.

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Now that we have calculated our TAM at £1.5B worth of HCSTC loan originations every year. Let's calculate our SAM and SOM.

SAM (Serviceable Addressable Market) = TAM x Target Market Segment (percentage of the total market)
As we don't currently serve a set of the market like users on state benefits or un-employed and a large part of self-employed users. Plus users with CCJ (County Courts of Justice) history, etc. We can only serve about 50% of this TAM.

So, our SAM = 50%*£1.5B = £750M

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Now onto our SOM (Serviceable Obtainable Market) = SAM x Market Penetration/Share
As the market is filled with direct competitors and alternative solutions. We also have restrictions in terms of how many loans can we give to our customers at a time, in a 6 month window and over a lifetime, which limits our market even further. We can realistically obtain only 25% of the SOM.
So, our SOM = 25%*£750M = £190M

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We're currently at ~£85M loan amount originations every year which is about 45% of our SOM.

** Thing to note here is that although we're at £85M and have around £190M SOM - we cannot go about acquiring the rest of the market just like that. Given that we're a loan product, the big caveat here is customer quality which cannot be known for certain until a few months after customer acquisition. And we have had a chance to underwrite a lot of these un-acquired customers but decided not to acquire them as their CAC/CLTV was not making sense. Therefore, the growth beyond this point would be slow, which would be aided by more improved underwriting process, slight product enhancement alongside better retention and acquisition efforts.

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* Another interesting thing to note is the presence of many lead brokers, who acquire all sorts of customers and then sell them to appropriate lenders to get a decent commission. This is at present the biggest and key acquisition channel for all of our competitors including us. But the problem with this channel is that these brokers (due to their effiicient business model where almost all their leads get sold at some price making PPC a viable channel for them VS lenders whose underwriting model doesn't approved more than 3-5% of the applications (click to application ~30%) leaving over 98% {100%-(30%*5%)} of the traffic useless. It becomes very difficult to bring enough revenue from the rest 1-2% trafffic to cover the entire PPC cost.
To combat this, I have created a new module within the product that sells the rejected leads to other lenders/brokers on a cost per funded lead basis just like other brokers do. This has given us some cushion to run some PPC campaigns but this needs to improve much more to get to a stage where this channel can scale.

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Designing Acquisition Channel​

The product is in Mature scaling stage - so need to focus on the existing best performing channles while testing some other channels to find new opportunities and avoid over-reliance on existing channels.

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As we're in the mature scaling stage, we would continue to double down on Partnership and SEO while putting in some efforts on PPC and content loop. Partnerhip >> SEO >>> PPC >> Content Loops.

Detailing your Acquisition Channel

Partnership Channel

Under this channel, we work with different credit brokers and affiliates/price comparison websites targeting the same market to get qualified leads.

Credit brokers dominate our market for 2 key reasons -

1. Users who are likely to get rejected from most lenders for a loan get to share their application with most of the lenders by filling out a single application with a broker.
2. They have almost no liability for bad customer outcomes i.e. customer default or customer redress - making their business model quite profitable.

Therefore, like all our competitors, we acquire most of our customers through them (over 80%). This is a cost efficient way to get leads that you assess as qualified.

The key differentiator becomes your unit economics that guide how much you can pay for different quality of leads, which decides how many leads you get to see and buy from the brokers vs your competitors in a bidding war.

The best way to optimize this channel is to improve the unit economics and underwriting model to better evaluate the leads and take better calls.

Affiliates/PCW - are partners who are not directly brokering the leads but in a way guide intent audience our way to get a commission. This is based mostly on the loan APR as the lowest APR products usually gets the top position. There are very limited affiliates who endorse high cost products like ours & very limited no. of users go to PCW to really compare products in our market, hence this channel is very small too.

Top experiments to optimize this channel would be:

1. Map the actual flow for all the leads to understand the actual originator of a lead and work directly with them to eliminate the intermediary party hence reducing cost. Most brokers buy leads from other brokers too in order to increase their supply, reducing this would help get faster results for the end users while improving the CAC for lenders.
2. Figure out the acquitisition channel of leads for these brokers to better segment various leads based on their perceived value. We have seen a clear value difference for customers from different acquisition channels.
3. Figure out what attributes of a lead can be used to better assess its approvability with other lenders in the ping-tree (system that allows a lead to pas thorugh multiple lenders based on their bids). Draft rough underwriting checks for all our competitors based on what kind of leads are accepted by them and use that to bid efficiently so that the leads that they can approve are first bought by us at a higher proce while the leads that they are likely to reject to be bought later at a lower price.
4. Offer Risk Based Pricing to these users to reduce drop outs.
5. Improve the onboarding journey for these customers as they come to our site through a third party and have low loyalty towards our brand.
   

Organic Channel

Within Organic, the only 2 viable channels are SEO (Google/Bing search) and organic social media (Facebook, Instagram, Tiktok and YouTube).

We're currently doing well on SEO where we've grown our SEO clicks by almost 10X over the last 2 years and it can grow further which would take time. We're focusing on creating helpful content in the Cluster-Pillar format for all of our target keywords (long tailed too) alongside financial literacy content to establish ourselves as an authority within this niche.

The content created for SEO is repurposed alongside some more creative assets and testimonials to publish on social media. This helps with engagement but due to a very negative perception of the market as stated earlier and to not attract any more redressal claims, we push limited information-only content through social media.

That leaves making site optimized for SEO is the key priority within Organic channel - which we have done well and continue to focus on.

Segment the SEO roadmap into three key investments:

1. 1. Technical SEO - Low effort to maintain the site once fixed. Design and follow best practices document. Have detailed audits once every 6 months.
   2. On page SEO and content production - This is the most important and effort heavy part. Create an annual content calendar followed by monthly and 3-month roadmaps to ensure the content is published at a set pace with relevant content. Have strong content guidance document to ensure the content is SEO optimized with target keywords, content helpfulness, serp features and internal linking. Have a super clean navigation and appropriate meta tags.
   3. Outreach - Have a solid plan to get high value backlinks from reputed publishers by means of guest posting, digital PR, HARO etc.

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Top actions to optimize SEO:

1. As most users use mobile devices to access the site, keep the website mobile-friendly. Have a mobile-first approach to content and design.
2. Create a robust target keyword plan covering branded terms, generic terms for solution as well as problems and competitors terms. Prioritise the efforts based on their short-term and long-term impact by understanding the search volume, expected CTR and expected conversions/returns. Use PPC efficiently to support SEO. The target is to be present on SERP with right messaging in the most cost-efficient way by alligning our SEO and PPC strategies.
3. Audit the competitors' activity to ensure we're on falling behind.
4. Take advantage of the SERP features like featured snippets, PAA, knowledge graph etc.
5. Use schema markups and sitemap efficiently to help bots understand the site well.
6. Stay on top of the market advancements like AI results to ensure the brand benfits from them.
   

Paid Ads

There was a time when I was spending over £600K per month on PPC to acquire customers profitably but due to market changes - the unit economic changed drastically pushing most lenders out of business and others working with a very low CAC. That made the PPC much more attractive acquisition channel for brokers who now had better margins than lenders.

Display and Paid Social Media marketing has also been a slightly expensive acquisition channel which got deferred further due to broader targeting (not as niche as PPC) which led to higher redressal cases.

For that reason, we have focused solely on Google PPC campaigns to capture new users under the paid marketing efforts which gets replicated to Bing search.

For PPC to become scalable for us, the internal broking model needs to improve with more participation from the direct lenders, which would take time. Until then, PPC would not make sense except for some very profitable KWs and branded terms.

Segment the keywords into three main themes:

1. 1. Branded terms
   2. Generic non-branded terms
   3. Competitor terms

Top actions to optimize PPC:

1. Find highly profitable search terms and focus on them with higher budget.
2. Align the brand PPC strategy with SEO to ensure the optimized use of PPC.
3. Find the most performing audiences and other demographic attributes and target them using a new adgroup.
4. Utilise your customer lists to target/exlude from targeting in all your campaigns.
5. PPC cannot be scaled with that low CACs, so either force your competitors out of the market OR improve the channel unit economics. These could be acheived by improving the conversion rate and monetization of the acquired traffic and partnering with direct lenders.

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Content Loop

There are 2 broad themes for the content loop cycle in our case:

1. Online reviews by customer distributed through social media by attaching engaging content.
2. Informational content in the form of text, infographics and videos created by us and distrinbuted by us using SEO/social.

Since social has not done much for earlier stated reasons, SEO with high quality content is the only viable channel here too.

Product Integration

Our loan is a very expensive way to borrow money in a super heavily regulated UK market. This is a product that you take in emergency situations (not medical one but any kind that requires money immediately). So we cannot advise people to take it for any purpose that is mainstream and channelized. However, some people do take it just due to convenience - something that we cannot promote/encourage.

Therefore, we cannot think of any product integration in this case.

Referral Program/Partner Program

As stated earlier, this is a product that people aren't happy/proud to use as it shows their financial vulnerability - so it becomes quite difficult for people to openly share it with their friends and family even if there are some monetary rewards. So it is a low scale and low value channel. I have tried that in the past but paused later when it didn't work out.

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