AFR says Wisr model more disruptive than alternative lenders

National Australia Bank has agreed to provide funding to Wisr, an ASX-listed startup which is encouraging people to reduce their overall borrowings. NAB cited its "belief" in Wisr's business model of creating "financial wellness", as it tries to reduce over-indebtedness.

Wisr shares rose by as much as 4¢, or 30 per cent, on Monday after it told the ASX NAB would provide an initial $50 million debt warehouse program - which may be scaled up to $200 million - to help the non-bank lender originate more loans. The shares settled to close up 1.5¢ or 12 per cent at 14¢.

The warehouse deal comes a month after NAB did a $57 million warehouse deal, scalable to $250 million, with personal lender Symple Loans, which intends to ramp up lending in competition with NAB and the other major banks.

The deals form part of NAB's commitment to provide $2 billion of debt funding to technology start-ups, including fintechs looking to take on the banks.

But Wisr's model is potentially more disruptive to the majors than simply backing alternative lenders. It not only has a credit business but has created an application to help people cut their debt. Wisr recognises this may put pressure on its own personal lending earnings, but is hopeful the approach will build loyalty to win future customers.

"We have created tools, apps, services and podcasts to help our customers pay down debt faster, not just for our personal loans but with any bank in Australia," said Wisr CEO Anthony Nantes. "By building a model orientated to the customer, an outcome might be less margin, but we could grow a bigger business as a result as customers lean into us.

Its technology rounds up spare change in the background of a customer's payment activity, and then uses those funds to pay down personal loans or credit cards at any institution the customer specifies. The app, launched in April, is available to users who are not customers of Wisr loans. It had 25,000 downloads as at June 30, a number that is expected to be bigger when the company releases a quarterly update on Thursday. It's loan book was $110 million at June 30.

The use of "spare change" round-up services is also being deployed by other ASX-listed players to pushing investment into exchange traded funds (EFTs).

Wisr's model has attracted the interest of NAB after it was scarred by the Hayne royal commission, forcing the bank to look for new ways to re-establish trust with customers.

"Their focus on delivering great customer outcomes around financial wellness led us to believe in their business model," said Cathryn Carver, the executive general manager of corporate and institutional banking at NAB.

"The management team are very credible and well supported and they don't see us as just a lender to their business, they see us more as a partner.”

Wisr has also created a credit score comparison site that 'gamifies' the credit scoring process and helps users improve their scores with the main credit bureaus, to reduce the cost of credit.

Mr Nantes said the government's open banking regime will help it develop the services by providing cleaner access to banking information, while the "comprehensive credit reporting" reforms are helping it present better data back to customers to help them improve credit scores.

The company, formerly known as DirectMoney, said on Monday the NAB deal would lead to an "approximate tripling of the average margin to Wisr compared to current loan unit economics".

The stock has had a wild ride on the ASX, trading at around 2¢ until mid-2018 before jumping up to around 5¢ until the end of last year. It took off early this year to hit almost 19¢ in May, then drifted back in recent months. It's market capitalisation is $110 million.