What you need to know:

• As the success of the buy now, pay later category surges, short-term lender Nimble is relying on heavy brand investment to reposition in market.
• CMO Oonagh Flanagan said Nimble will double down on above-the-line channels, aiming to over-index on brand spend by FY23.
• The short-term lender is also running a new brand campaign focused on driving its new position as a "near-prime loan" business.
• Flanagan and the marketing team are also investing in new segmentation research based on mining existing customer transaction data.

Credit crunched

"We've felt the squeeze of Afterpay". That is the reality forcing short-term lender Nimble to reposition itself in the financial sector and enter the near-prime loan market, per CMO Oonagh Flanagan.

Originally known for its quick loans of up to $5000, the business has felt the brunt of the buy now, pay later sector's meteoric rise. It's getting out of the game.

Flanagan told Mi3 that the market had become too tight, with the likes of Afterpay, ZipPay and Openpay dominating, while the entry of salary advancement businesses has also turned the screw.

"The proliferation of buy now, pay later has had a significant impact on the short-term lending industry, as we are subject to the same regulations as any other credit lender in Australia, while they have a lower barrier for entry," Flanagan said.

"So while we are saying no to 90% of our applications, they have less regulation and are able to offer their services to a wider customer base."

Brisk business

Nimble's customer transaction data showed that 18-months ago, 25% of its customers had a relationship with a buy now, pay later product. Today it's over 80%.

According to the latest ASIC report into the category, there were more than 6.1 million open accounts for buy now, pay later as of June 2019, representing around 30% of the Australian adult population.

The total value of all transactions increased by 79%, from $3.1 billion in the 2017–18 financial year to $5.6 billion in the 2018–19 financial year.

The category's dominance has forced Nimble to enter a new market, dubbed 'near-prime' loans. These are loans provided to people who don't have the credit score to qualify for the typical loans offered by most major banks.

"We won’t compete with the banks, but we also know from our data that a lot of Australians don’t have the credit scores in the 900 region to take advantage of the loans and low-interest rates currently on offer," said Flanagan.

"That means we can now pitch ourselves as a non-bank lending brand targeted toward regular Australians, offering personal loans up to $25,000 and car loans up to $50,000."

Data dramas

Despite Nimble having access to a plethora of transaction and credit data to determine loan viability, the company has previously struggled to integrating that into marketing strategy.

Using a practice known as bank scraping, Nimble can see the last three months of a consumer's bank transactions and uses AI algorithms to determine the validity of an application.

Flanagan said the issue that it faces when trying to apply a similar strategy to creating audience and potential customer target segments is that the data is still a distinct case-by-case matter.

"To use that information to target a customer is really difficult because it’s very much a person-to-person matter, so while you may be able to establish a consumer segment that would likely have interest in the loan, there's no guarantee that they will be able to pay it, making it a waste of marketing efforts," she said. 

But the data can inform the brand's new near-prime products, which have a wider catchment and different customer profile. Nimble has been working on overlaying its banking and transactional data to create audience segmentation, however, this remains "very much in its infancy", per Flanagan.

"What we are already seeing is interesting – one of the segments we identified would have previously sat in the 'too risky' bucket for us when it came to a short-term loan. But since overlaying our datasets we see they are actually one of the most suitable for new products," she said. 

"This is completely changing how we go market with certain products."

Brand building

Brand has always been a focus for Nimble, according to Flanagan, alongside performance and the ratio currently stands at a 40:60 in favour of performance.

She said 60% of its monthly loans are attributable to strong investment in brand, with 40% coming from direct traffic, 10% from paid search and a further 10% from organic search.

"What you will see in FY22 will be a stronger push into brand. I’d love to see a 50:50 split between the two," said Flanagan, adding the "Holy Grail being that ability to over-index on brand... but that's likely going to be an FY23 strategy."