What happened: British department store John Lewis has partnered with Zopa Bank to offer personal loans directly to its customers (The Independent). Customers can apply for a personal loan up to £35,000 on the John Lewis website without any impact on their credit score.
My comment: In the past few months, we have seen the big British retailers Tesco and Sainsbury's getting out of their financial offering while selling the units to incumbent banks. John Lewis is doing the opposite; however, it is quite crucial to understand the model behind it. Tesco and Sainsbury’s had their own bank licence and publicly stated that the regulatory scrutiny and increased cost were one of the main drivers behind their decision, and not that it wasn’t interesting for them to offer financial products. John Lewis, on the other hand, is partnering with Zopa and thus is not being regulated themselves.
The partnership seems to make a lot of sense but as usual, the devil is in the details. There are two factors that will have a big impact if this partnership is going to be successful or not: the customer journey and customer benefits. Firstly, embedding a loan application into a non-financial brand’s website is not that hard. However, what’s important is that the customer journey is smooth and does not require the applicant to re-enter the same information multiple times. Or to put simply, if its just another website where a customer can go through the usual Zopa loan application process, then it will be tough.
Secondly, it will also be crucial why the customer should apply for the personal loan on John Lewis’ website. By now, there are a dozen digital banks and alternative lenders available where a consumer can apply for a personal loan. When embedding a financial product, it is always crucial to ask the question why the customer should come to you.
I have not looked at the offering in detail, but I hope that the John Lewis team has spent a good amount of effort on those two areas because they will be crucial for their success.
