Fintech lender OnDeck to expand JPMorgan Chase partnership

Small business lending platform OnDeck reports results amidst speculation that Kabbage might try to buy it.

OnDeck’s landmark “lending-as-a-service” partnership with JPMorgan Chase is expanding. OnDeck licenses its software to the bank to help power its online lending services for small businesses. The partnership, which was announced in 2015, will be extended up to four years, during which time Chase will refine and expand the proposition.

The news comes in tandem to OnDeck’s results for the second quarter of 2017. Its originations were down 19 per cent to $464.4m quarter-on-quarter, which is said to be in line with the company’s strategy of tightening its credit management.

However, gross revenues grew to $86.7m, up 25 per cent year-on-year, driven primarily by higher interest rates. Meanwhile the company was hit by higher delinquency and charge-off rates in the second quarter than during the corresponding period of 2016.

OnDeck’s gain on sale was down to $0.3m, reflecting the firm’s decision to significantly reduce the proportion of loans sold through its Marketplace platform, a strategy that was announced last quarter.

OnDeck had mostly wrapped up its $45m programme to cut back on operating expenditure by the end of Q2 2017. Its operating expense as a proportion as a per cent of its revenue was 51 per cent in Q2, down from 68 per cent during the prior year period.

The company’s GAAP net loss was $1.5m by the end of Q2 2017. It hopes to achieve GAAP profitability by year-end, and claims to be on track to do so.

"OnDeck's second quarter 2017 results demonstrated solid progress toward achieving our strategic priorities," said Noah Breslow, OnDeck's chief executive officer. He added that OnDeck is on track to return to quarter-on-quarter origination growth in Q3.

Kabbage, a rival to OnDeck in the small business lending sector, recently raised $250m from SoftBank’s Vision Fund. Some reports have suggested that the money will give Kabbage the firepower necessary to acquire OnDeck.

You can access OnDeck’s full results here.