Lions and Bears and Revenue from Predatory Interest Rates

Dave, MoneyLion report hundreds of millions in revenue

Andy Spears

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Photo by Il Vagabiondo on Unsplash

Short-term loans are big business and can mean big money, even more so if they are offered in a cool, fintech-y way. I’ve written about the predatory practices of companies like the Dave App and MoneyLion.

As noted in those stories, both of these fintech lenders (and to be clear, MoneyLion is moving far beyond lending), offer small-dollar, short-term loans that carry APRs in the triple digits.

Turns out, that generates a ton of revenue.

As Jason Mikula of Fintech Business Weekly notes:

The rest of Dave’s revenue is “Service based,” which is primarily composed of “optional” tips and express funding fees. Dave reported $43 million of such revenue in Q2, up 25% from the $34.4 million it did in the same quarter last year. Service based revenue made up about 94% of Dave’s revenue.

Dave has narrowed its revenue target from its previous $200-$230 million to $200-$215 million for FY2022.

Meanwhile, over at MoneyLion:

Similar to Dave, 97% of MoneyLion’s revenue is classified as coming from “service and subscription” revenue. The category includes the $19.99 per month fee for MoneyLion’s “Credit Builder Plus” membership as well as expedited funding fees and “tips” from its Instacash Advance product.

At least MoneyLion has slightly increased its revenue forecast for 2022, now targeting $330-$340 million in adjusted revenue vs. its $325–335 million forecast from last quarter.

So, there you have it. Hundreds of millions in annual revenue generated from “fees and tips” that essentially work out to extremely high (triple digit) interest rates.

Turns out, making small loans with short terms at triple digit APRs works out to huge income.

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Andy Spears

Writer and policy advocate living in Nashville, TN —Public Policy Ph.D. — writes on education policy, consumer affairs, and more . . .