MoneyLion, an 8-year-old New York-based neobank, wants to become a destination for all of its customers' financial needs, including banking, lending and investing, but along the way it's grappling with regulatory concerns and challenges in differentiating its product from rivals. 

Its strategy resembles competing propositions from other fintechs, but founder and CEO Dee Choubey said what sets MoneyLion apart is its approach to serve customers across the financial needs spectrum, from times of "excess" — through banking, cash management and e-commerce features — to times of need, with offerings such as its cash advance product, as well as personal and credit-builder loans.

"We're building a data-driven 'super app' for hardworking Americans," Choubey said. "Eighty percent of Americans oscillate between times of excess and times of need, and it's never constant for them. Our ability to use our proprietary technology stack, our data advantage, and our intimate knowledge of our user base to build products for those inflection points really sets us apart."

MoneyLion began as a personal finance and lending platform. A few years into its operations, it added digital banking and investing. It plans to roll out crypto this year, and a "buy now, pay later" offering is in beta. The company announced in February that it will go public through a merger with special-purpose acquisition company Fusion Acquisition Corp. in a $2.4 billion deal. MoneyLion also acquired financial planning technology firm Wealth Technologies in March, a move Choubey said will help enhance its ability to offer personalized insights.

The technology from that acquisition "allows us to take details from the consumer, including age, income, retirement date, expenditure capabilities and provide very customized term-by-term guidance," Choubey said. The company will continue to integrate its capabilities into the MoneyLion platform.

Subscription-based menu of services

MoneyLion positions itself as a financial-services answer to Costco or Amazon. But customers can opt to subscribe to products on an "à la carte" basis. 

The RoarMoney checking account, offered in partnership with MetaBank, has a $1 monthly fee, while MoneyLion’s robo-adviser costs $1 per month. Instacash, or MoneyLion’s cash-advance product, has no monthly fee, but users pay $3.99 to $4.99 for instant access to funds. Meanwhile, MoneyLion’s credit subscription offering, at $19.99 per month, includes access to loans (annual percentage rates vary from 5.99% to 29.99%), banking and investing. 

"Once we’ve onboarded the consumer, once we've gotten their payroll [direct deposit], at every different inflection point, they will need different products," Choubey said. 

The company added a product marketplace this year, which includes offerings from Nationwide Insurance, and Choubey said the company is open to adding nonfinancial products.

Regulatory challenges

As MoneyLion seeks to reach a broad swath of customers, its lending offerings have come under regulator scrutiny. The company disclosed civil investigative demands from the Consumer Financial Protection Bureau in three successive years, from 2019 through 2021 in a June regulatory filing  related to its membership model and its compliance with the Military Lending Act. "The investigation is ongoing and any potential impact on our financial condition or operations are unknown at this time," the company said in the June filing.

MoneyLion also received investigative subpoenas from the Securities and Exchange Commission concerning a subsidiary, Invest in America Credit Fund 1 LLC, through which MoneyLion’s credit and payroll advance products are financed. MoneyLion’s lending products are also the subject of inquiries and investigations from state financial oversight authorities from California, Minnesota and Colorado.

Choubey said the company is cooperating with regulators and is on a "very solid footing" with them. "We operate in a highly regulated environment," he said. "There's lots of regulatory agencies that we report to and as we innovate and as we build new products, oftentimes they'll have questions. It's no different from any regulated institution."

Since MoneyLion’s credit program levies a monthly fee on top of the loan APRs, some analysts contend that could mean a heavier fee burden on consumers when compared to similar offerings on the market.

"Many banks, credit unions, and some fintech startups offer similar credit-building loans for total costs as low as $60 on a $1,000 12-month loan, or about 15% of the total costs for a similar credit-building loan from MoneyLion," said Jason Mikula, a fintech consultant at 312 Global Strategies BV. 

Meanwhile, the company's cash advance offering also has some potential challenges, including costs consumers could rack up in the form of voluntary tips, instant-transfer fees, Mikula said. There is also a risk that automated repayments may trigger insufficient-fund or overdraft fees, he said.

MoneyLion, according to its website, schedules Instacash repayments based on its analysis of the customer’s cash-flow patterns. Customers can also opt to receive funds in 24 to 48 hours without paying extra fees.

Choubey also said customers have opportunities to win back up to the entire monthly membership fee based on frequent engagement with the app. "That's been one of our hallmarks for a long period of time — how we use engagement to educate and to lower the cost of financial products," he said.

Choubey said cash advance product is designed to meet the evolving needs of customers with volatile income patterns.

"There are multiple models for delivering [earned-wage access] and conversations that we're having with regulators are actually very thoughtful and productive," he said.

MoneyLion reported its net revenue nearly doubled during 2021's first quarter, reaching $33.2 million, compared with $16.8 million a year earlier. Choubey said the company generates revenue from transaction fees (including subscriptions), interest on lending (which accounts for 5% of the company’s revenue), registered investment adviser fees, affiliates, and interchange fees. MoneyLion said it has 1.8 million customers.

The path to differentiation

Stephen Greer, a senior analyst at Celent, suggests MoneyLion, like many neobanks, is on a path to diversify its revenue sources beyond interchange fees. "[That's] pretty important because they're going after deposit accounts which are fairly low margin, and fairly cheap," he said. "I wonder, with some of these neobanks, at what point do they reach a limit and afterward need to become a bank to start really growing."

He noted that MoneyLion, like many banks and fintech startups, is likely aiming to play an advisory role to its clients as a tool to grow wallet share. But setting itself apart in a sea of low-cost competitors, like Chime and Varo, may still pose a challenge for the company as it scales, Mikula said.

"As a nonbank fintech, [MoneyLion] partners with MetaBank to offer some of its products, constraining its ability to differentiate," he said. "MoneyLion has little competitive advantage versus other 'neobank' products, and its cash advance and credit building products are arguably worse for consumers — less transparent, more expensive — than similar features from Chime or Varo."

MoneyLion also sees its marketplace model as a differentiator. "Our overall vision is to be a daily destination," Choubey said. "We're really transcending financial transactions to life transactions [and that] allows us over time to go from being a platform of single products ultimately to being an aggregator."