JPMorgan Chase has entered into the world of online lending, inking a deal with OnDeck Capital.
JPMorgan CEO Jamie Dimon confirmed the bank’s intentions at an event in Washington on Tuesday. According to Ben McLannahan of the FT, a pilot lending project will begin in January, which will involve JPMorgan lending money to its c. 4 million small business customers via the OnDeck platform. Chase, JP Morgan’s primary US banking unit, will fund the loans off its balance sheet. The loans themselves will carry Chase’s branding, with the OnDeck platform presumably taking on a behind-the-scenes role.
Clear synergies between the two companies rest at the heart of the collaboration. According to Bloomberg, Dimon referred to online lending to small businesses as “the kind of stuff we don’t want to do or can’t do”. Jenn Piepszak, Chief Executive for business banking at Chase, struck up a similar tune:
“We clearly bring scale and customer acquisition to the table; what they offer is a disruptive customer experience that is very complementary with our existing services.”
OnDeck recently crossed the $3 billion mark in cumulative lending volume, an output which the platform estimates has generated around $11 billion in economic impact, as well as 74,000 jobs in the US. The platform will soon go live in Canada and Australia. OnDeck is listed on the New York Stock Exchange. The company’s share price has fallen from upwards of $24 per share at IPO in December last year, to around $9 a share at close yesterday, according to Bloomberg data. Will news of a partnership with Chase cause the share price to rebound?
JP Morgan is the largest US bank in terms of deposits. The Chase collaboration appears to have been in the works for some time. At the event in Washington on Tuesday, Noah Breslow, CEO of OnDeck, said that the company had invested “significant resources in building out compliance, data and IT functions, with a view to partnering with some of the biggest institutions in the world. We fully intend to scale up the [Chase] programme.”
JPMorgan is not the only major financial institution attempting to lay siege to the online lending space. Goldman Sachs, Blackstone and Hargreaves Landsdown are also moving in. Harit Talwar, formerly of Discover Financial, is leading the Goldman operation – which will seemingly come to be known as “Mosaic”. Talwar’s outfit will function as a direct lender, writing loans of around $15k-$20k in size. The venture has been actively poaching senior employees from the likes of Lending Club and OnDeck, most recently stealing “Chief Architect” Greg Berry away from the latter. B2R Holdings, a portfolio company of a Blackstone Group LP fund, has also launched into this space, following a rebrand to “Lending.com”. Hargreaves Lansdown is expected to launch a peer-to-peer lending offering in Autumn 2016.
The arrival of JPMorgan in the world of online lending will likely put rival banks on notice. The precedent has been set; innovate, or be left behind.
AltFi is returning to Amsterdam for its second annual Summit in the city. The inaugural event last year was a roaring success, with key figures from across Continental Europe's alternative finance and digital banking sectors highlighted. These included Jeroen Broekema, managing director of Funding Circle Netherlands, and Mieke van Engelen, head of innovative partnerships at ABN AMRO's standalone lending platform, New10.