JPMorgan Chase Partners With Online Lender

The banking giant gets access to On Deck's technology platform for making small-dollar loans to small businesses.
Matthew HellerDecember 2, 2015

In a marriage of a banking behemoth and an alternative lender, JPMorgan Chase is teaming up with On Deck to provide small-dollar loans to small businesses.

On Deck specializes in making loans cheaper and faster than traditional lenders, using proprietary algorithms to assess creditworthiness. Small-dollar credit typically refers to loans of less than $250,000.

As Bloomberg reports, big financial firms have been “working with online lending startups that less than a decade ago set out to bypass banks by offering so-called peer-to-peer loans, matching borrowers with individuals who wanted to fund them. While some banks use the platforms to make loans cheaper and faster, others just make the ventures’ products available to their customers.”

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JPMorgan had considered building a small-business product in-house before ultimately deciding to work with On Deck. The product will carry the Chase brand and is expected to be rolled out in a pilot program next year.

“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,” Jennifer Piepszak, JPMorgan’s head of business banking, told Bloomberg.

Small business loans that currently take days or weeks to be funded could be made within hours or a day, she said.

“It really originated with a need to remove pain points and just make the process easier,” Piepszak explained. “We obviously have the lending experience; they have a disruptive customer experience that we’re very interested in.”

On Deck’s short-term loans average $30,000 and carry annual interest rates of 18% to 36%, two to three times more expensive than conventional bank credit. According to its website, it accesses data from applicants’ online banking and credit-card processing accounts, credit scores, and other sources.

The lender’s rates have “gotten them a lot of criticism,” Forbes noted. “However, its technology has allowed would-be borrowers to get a yes-or-no answer on their applications quickly, and that speed has been a key selling point.”

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