Analysis Featured

Managing Customer Acquisition Costs in Online Lending


Marketplace lending start-ups are mushrooming across the United States. The main differentiator between successful start-ups and copycat lenders is the ability to manage your Customer Acquisition Cost (CAC). While most of the fintech companies struggle with the customer acquisition, MoneyLion has hit upon an innovative strategy to attract customers. They start a customer relationship with a suite of personal finance tools, proprietary data analytics, and a recommendation engine, which helps the user improve his credit score and financial wellness. Once ingrained in the user’s financial lives, MoneyLion offers them multiple credit products. This has brought down the company’s CAC to almost 25% of the $400-$500 CAC reported by other lenders in the segment.

MoneyLion Loan Offers

MoneyLion helps customers reach their financial goals by designing personal loans that are simple and transparent, but they also provide financial tools to help customers better their financial health and better financial decisions. The loan amount offered by MoneyLion ranges from $1,000 to $35,000. Interest rates start at 7%. For near-prime borrowers, they’re offering $500 to $5,000.

MoneyLion’s Non-Loan Offers

Considering there has been a substantial rise in the number of people struggling with credit woes, MoneyLion’s unique approach in offering free wealth management tools, credit monitoring, and other non-loan products first rather than try to sell customers on loans is endearing it to those customers. This also helps the company understand the customer better and his precise needs; thus, they can tailor something specific for a client when offering credit as compared to a generic loan offer from multiple websites.

MoneyLion also makes recommendations to customers on how to improve their credit profile by keeping credit utilization low. For instance, if any customer spends irresponsibly, like eating at restaurants too often, then MoneyLion suggests that the customer cook at home and, in turn, offers food coupons as incentives.

MoneyLion’s Customer Acquisition Strategy

With over 760,000 bank accounts tracked, 200,000 enrolled for credit monitoring, and 150,000 loans originated, the startup has successfully executed its model of loans second and personal finance tools first. MoneyLion uses conventional channels like digital and direct mail, but its focus is on word-of-mouth marketing. MoneyLion has almost 10%-15% of their customers coming from word of mouth, and their CAC is almost zero for such clients.

The company also gives enticing incentives to customers that endorse a friend for a loan. For instance, by endorsing a friend to MoneyLion, the endorser gets to pay lower interest rates on future loans. An endorser is given 100 points for each endorsement and is able to redeem those points for gift cards. MoneyLion’s top bracket includes 30 endorsements from which an advantage of 15% reduction in loan interest rates can be availed.

Loan Underwriting

The young startup has built an entire underwriting process in-house to ensure it is tailored to unique insights. Nothing else currently on the market is flexible enough to incorporate customization on a regular basis. The majority of loans sit on the company’s balance sheet and funding comes primarily from hedge funds and banks.

MoneyLion’s first version was capitalizing social media and offering discounts to customers who link their social media accounts with the company. They also thought about using social media data to underwrite clients. But foreseeing regulatory issues, their lawyers deterred them from doing so. Now the company uses social media data only for incentivizing clients.

Company History

MoneyLion was founded in 2013 with the aim to provide a sophisticated modern online lending platform to help customers gain control of their financial health. It is headquartered in New York and has offices in San Francisco, Salt Lake, Utah, and Kuala Lumpur. They employ approximately 250 professionals.

Founder and CEO Diwakar Choubey has a wealth of experience in investment banking. His CV includes positions at Barclays, Citadel LLC, Goldman Sachs, and Citigroup. Prior to MoneyLion, he worked at Barclays as a senior investment banker.

Co-founder and Chief Technology Officer Chee Mun Foong, prior to MoneyLion, was a founding member of Simulex Inc. Co-Founder and Chief Strategy Officer Adam Green worked at Young Wall Street Division before starting at MoneyLion. Co-Founder and Chief Information Officer Pratyush Tiwari previously worked at Knowrtl as the chief operating officer.

MoneyLion Funding

Initially, MoneyLion raised $1.5 million from six investors and has managed to raise $24 million in various rounds of funding to date. The latest round was a Series A round that garnered $22.5 million from six investors. Edison Partners lead with BroadHaven Capital Partners, Citizen.VC, Clocktower Technology Ventures, FinTech Collective, and Montage Ventures also participating in the round. The lender has also raised a $650 million debt facility from the investment bank Macquarie Group. This will help the company to expand its lending capability.


MoneyLion has hit upon a different road to acquiring clients. They do not want their association to be restricted to a lender-borrower relationship. Rather, the company strives to help customers improve their financial lives, and MoneyLion’s product bouquet is based on proprietary technology specifically designed for helping the user climb up the credit ladder. This creates a unique level of trust, which is monetized by the company by then offering credit products. This reduces their CAC as well as default rates because the company is intimately aware of a client’s financial performance over a long period of time.


Written by Heena Dhir.


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