JPMorgan Chase has become the latest bank to team up with an alternative lender, striking a deal with OnDeck Capital to deliver loans to its small business customers.
The bank will pilot a new small-dollar lending product, delivered online next year to some of its four million small business customers, head of business banking, Jennifer Piepszak, told Bloomberg.
"By combining Chase’s relationships and lending experience with On Deck’s technology platform, we’ll be able to offer almost real-time approvals and same- or next-day funding," says Piepszak.
The news sent OnDeck's share price soaring 28%, to $11.50, in extended trading on Tuesday. The stock had actually closed down 9.5% after JPMorgan boss Jamie Dimon first revealed news of a tie up with an online lender and the market assumed he meant OnDeck rival Lending Club.
According to Morgan Stanley, online lenders extended $4.6 billion in small-business loans in the US last year. Rather than try to fight them off, banks are increasingly looking to work with these new players.
Piepszak says JPMorgan considered building the new product inhouse before deciding to partner OnDeck. "It really originated with a need to remove pain points and just make the process easier. We obviously have the lending experience; they have a disruptive customer experience that we’re very interested in."