January 6, 2015
Non-bank lender Progreso Financiero recently announced plans to change its name to Oportun - based on the Spanish word for opportunity - to reflect the value it provides to underserved Hispanic borrowers.
Forging a new identity
To determine its new name, Progreso Financiero drew upon the findings of a consumer research project including both quantitative and qualitative data. The new name does a great job of communicating how the non-bank lender's customers perceive the company, Juan Valdes, vice president of Marketing & Communications, said in a statement.
After taking the time to explore how its customer base really feels about its service, Progreso Financiero has high hopes its customers will welcome not only the company's new name, but also its fresh identity, Valdes said.
Building upon a foundation
Progreso Financiero is seeking to build upon its current foundation, which consists of 130 locations spread across three states and the more than $1.3 billion in loans it has extended since 2006.
Progreso offers small-dollar installment loans, which generally have better terms than payday loans, according to American Banker.
More specifically, figures provided by a California Department of Business Oversight report showed that in 2013, roughly two-thirds of the company's loans had annual percentage rates of at least 30 percent, but less than 40 percent, American Banker indicated. Of the remaining third, the majority had APRs reaching 40 percent or higher.
Establishing credit histories
By obtaining loans from Progreso, which reports payments to credit bureaus, Hispanics can build up a credit history. Currently, an estimated 23 million people in this specific group have either little or no established credit history. These trends are evident in the company's client base, where roughly half their first-time customers have not yet established a credit score.
Raul Vazquez, CEO of Progreso Financiero, stated that although his company is transitioning to a new name in 2015, it is still devoted to providing loans with terms that are reasonable and helping members of the underserved Hispanic community improve their credit history.
Opportunities for financial institutions
While Progreso's approach may seem novel, it represents a single company in a market that is being inundated with new channels for loan origination and investment opportunities. The disruption that ensues in the sector will create both winners and losers, and financial institutions must be careful if they wish to select loan portfolios that best suit their needs and interests.
To increase the chances of picking the right portfolio, industry participants might consider working with Garnet Capital Advisors, a loan sale advisory firm with substantial experience spanning many types of loans.