My entry earlier this week demonstrated that a lot of people are interested in the topic of lead generation. As as a result, I'm going to publish a Q&A that I conducted with Randy Mitchelson, a Partner and CMO at National Web Leads in Atlanta, Georgia.
I met Randy back in 2012 at CFSI's Underbanked Financial Services Forum in San Francisco.
Randy and I shared the second row in a session featuring Ryan Gilbert of BillFloat, Douglas Merrill of ZestCash (now ZestFinance), and Paul Leonard from the Center for Responsible Lending. Randy was hoping to make an introduction to the well-tattooed Mr. Merrill; I had the same plan for the traditionally-groomed Mr. Gilbert.
Randy used to sell leads to colleges and universities, but most recently he has been engaged in online consumer loans leads.
Randy's Bio: Randy Mitchelson is an entrepreneur, author, personal financial expert and community activist. Mitchelson publishes the DailyDollar helping consumers save money or earn extra income with free and esy to read persaon finance tips. U.S. News and World Report named DailyDollar to its list of 8 Savvy Personal Financial Podcasts. Mitchelson earned his BS and MBA at Rensselaer in Troy, NY.
Question: How is the recent action by the New York Attorney General, specifically his decision to penalize banks for serving the ACH requests by online payday lenders, impacting your business?
The action by New York and other AGs is intended to weed out lenders which are failing to comply with rules and regulations about interest rates, fees and collection practices. Unfortunately, the approach caused some ACH providers to “throw the baby out with the bath water” in order to mitigate their perceived regulatory risk. In other words legitimate lenders that are compliant with those laws lost their ACH processing access. This has affected lead generators as there is less demand for leads while affected lenders scramble to find alternate solutions to facilitate electronic loan funding and repayment.
Question: How do you see that decision changing the footprint of the payday lending model? How will it affect pricing as well as the supply of dollars?
This is a transition period for the industry and it is speculative to definitively state what changes are permanent versus temporary. There is a possibility that the value of leads will decline since there is less competition. Also, it is possible that the flow of payments throughout the value chain will slow down. Personally, I hope that this transformation will result in the creation of a greater number of more affordable loan options for consumers who rely upon alternative financial services.
Question: Describe how a ping tree works for those that are not familiar with the term. What actions start the process of an auction on a ping tree?
A ping tree is software that allows sellers to monetize leads by shopping them to multiple buyers in real time. Ping trees are used in several lead generation segments including installment loans, auto loans, payday loans, insurance quotes and education. When a consumer submits their information to get a product or service the data is reviewed in real-time by a potential buyer’s computer system and real-time accept or reject responses are sent back to the seller. If a lead is sold, the consumer will be redirected in the computer or mobile device browser to the website of the lead buyer in order to complete the fulfillment process.
Question: What kind of payment is offered for a prepaid card lead? For a payday loan lead? For an EDU lead? What factors contribute to the pricing?
There are several different pricing models available to marketers for leads. These include pay-per-click, cost-per lead, cost-per-sale, and cost-per-action. The value of a lead falls in a range that is different depending upon the pricing model. Like most industries, supply and demand also play a role in pricing. In general, the more information that is collected, the more valuable a lead becomes. Factors for loan leads include income and stability as measured by longevity at the same job and home address. Geography also plays a role such as the zip code. The value of leads is based on the product or service being marketed. A qualified lead for an office equipment company that has an average sale of $10,000 is worth a lot more than a lead that involves a simple submission of an email address to sign-up for an email newsletter. Leads can be worth anywhere from $0.01 to hundreds or even thousands of dollars.
Question: Clarity recently coined the term "prior prime." What does that describe - who is the prior prime, how did they get there, and how are they underwritten to by banks? What does it mean in the payday space? What does it tell us about banks?
Prior prime refers to a large class of U.S. consumers who had "A" credit before the Great Recession and now find themselves with "B" credit due to a foreclosure or other blemish on their credit report that happened when the economic crisis ensued. In other words, it is a segment within the non-prime consumer category. The prior prime group typically has stable employment, stable income and a willingness and ability to repay unsecured debt (credit cards and other loans), but are struggling to recover from whatever credit issue they faced. As a result, modern day credit decision engines used by traditional banks are rejecting these clients just based on the score alone. As a result, the prior prime audience is seeking alternative financial solutions. They are lendable to with the proper underwriting and risk-based pricing. A survey by Clarity Services revealed that forty percent of 'Prior Prime' consumers have been in the same job for five or more years and 64 percent have incomes between $25,000 and $75,000.