Until now mainly offered by fintechs, instant mini-credits are now attracting banks, such as LCL, which is launching a new offer called Flex. Available in amounts of between 200 and 2,000 euros, the mini-credit offered by LCL is repayable within 3 months.
Instant mini-credit: LCL follows in fintechs' footsteps
Until now, the mini-credit market has been dominated by fintechs such as Cashper, FinFrog and Bling, offering instant loans of up to 600 euros. Thanks to algorithms analyzing dozens of criteria, the customer's eligibility for these mini-credit offers is rapidly validated, and the sum is loaned at zero interest.
Last Thursday, LCL announced its entry into this market with an offer called Flex. The amount of the mini-credit ranges from 200 to 2,000 euros, a sum credited instantly, according to the LCL press release.
The loan is repayable in 3 months at zero interest, " according to a precise schedule communicated on subscription ". There is a fixed " set-up " fee of between 2 and 20 euros, depending on the amount borrowed.
Zero interest mini-credits, but high fixed costs
This mini-credit can be taken out via the bank's application, without the need to go through a bank advisor. According to LCL's press release, " this 100% digital underwriting simplicity meets the expectations of LCL's young, connected urban clientele, who want instant and autonomy ".
And it's already proving a great success: in just 10 days, the bank has announced that it is recording between 300 and 400 transactions a day, which should enable it to far exceed its initial target of 100,000 instant mini-credits a year.
This new offer is also very profitable for LCL. While the interest rate is 0%, the annual percentage rate (APR) is not. Taking into account fixed charges ranging from 2 to 20 euros, it varies between 5 and 13%.
While the instant mini-credit market is now of interest to banks and fintechs alike, it is still being closely watched.
In April 2021, the consumer association UFC-Que choisir filed a complaint against 3 market players, Cashper, Bling and Floa Bank, for "misleading commercial practices".
UFC-Que choisir denounced " real interest rates up to a hundred times higher than the usury rate ", concealed from customers.
In a press release dated March 31, 2022, the ACPR called micro-credit players to order, reminding them that " only licensed professionals are authorized to market small loans ". A few weeks after this reminder, Floa Bank lowered its rates and Bling ceased trading.