E-loan gives power to the borrower

By CHRIS BARTON

E-loan co-founder Chris Larsen is at the vanguard of the new economy – the coming force that threatens to radically change the nature of business.

His vision has already made its mark in the United States, where the online lending company clocked up $US2 billion ($4.03 billion) in loans last year.

It has also just launched in Australia (www.e-loan.com.au), hard on the heels of a rollout in Britain a fortnight ago and Japan in December. Germany will be annexed next, followed by other European countries and, in about three months, New Zealand.

The vehicle for E-loan's British and downunder expansion is eVentures – a joint venture between Rupert Murdoch's News Corporation's $A600 million ($759 million) e-commerce investment fund, epartners, and Japanese internet investor Softbank. The venture involves $US25 million of seed capital.

In New Zealand eVentures includes a 20 per cent stake held by Sky TV founder Craig Heatley. EVentures has also announced it will soon bring local versions of US e-tailer Buy.com into Australia and Britain.

Mr Larsen, in New Zealand briefly yesterday after the Australian launch, said the joint-venture approach to developing the E-loan global brand was preferred over subsidiaries, which he saw as "inappropriate to the new economy."

This was not just because 50:50 joint ventures bypass US listing requirements that subsidiaries revenues and expenses must be consolidated. It was also because they freed up each business unit to invest what was appropriate to its market.

"In each market you don't know how fast it's going to build. We're interested in the appreciation of the company's value rather than squeezing revenues."

As with most new-economy companies, E-loan, founded in 1996 and moved to an internet-only business in June that year, is yet to show a profit.

"We're on a path to profitability which, as we're telling our investors, starts in the fourth quarter of 2002. The path continues to be on track."

Mr Larsen looks forward in the long term to the possibilities for sharing distribution and ideas once the global company is in place.

"It's going to be really interesting when, for example, the kiwi consumers can easily get access to capital from Europe."

In the meantime, however, e-loans will come from local partners. The Australian rollout, which has 140 different products from 11 lenders, including ANZ, Westpac, NAB, Citibank, St George and Rams, gives a glimpse of what can be expected here.

EVentures New Zealand's newly appointed chief executive, Cindy Mitchener, said the chief technology manager and other staff for developing the local site would be announced next week. As yet there was no official launch date.

The E-loan approach to borrowing is to put control back in the hands of the consumer. The website, which adheres to strict privacy policies and does not carry any advertising, enables customers to "shop lending providers in real time and in one place" and make comparisons between different offerings.

Mr Larsen says the main difference between virtual brokerage compared to a real mortgage broker is that there is no pressure to buy.

Online customers can peruse offerings at their leisure with no obligation. They do not need to share personal details until they are ready to apply for their loan.

"In the new economy the consumer is dramatically empowered. They say 'Don't try to sell me, just give the tools and I'll figure it out for myself."

The E-loan concept grew out of Mr Larsen's experience running a traditional mortgage brokerage company and then turning that process into software.

In the US the site has attracted 2.5 million customers since it began with 60,000 product permutations. It has expanded from mortgages into car loans, small business loans and credit cards.

Like human brokers, the site makes money from commissions – paid "only on successful distribution of a product." In most cases the final handing over of the loan is still a physical transaction.

But as digital signature laws come in to play – "delivering intangible product, via an intangible medium" direct from one account to another may soon become a reality.

The benefit to banks and other lenders offering loans through the medium is the elimination – through E-loan's self-selection process – of many of the sales-process costs.

Mr Larsen said E-loan was constantly scouring the market for new products to add to its database. More recently it had been taking a proactive role suggesting to lenders the sort of products its customers wanted.