American Banker Online
By Kevin Wack
16 October 2018
OnDeck Capital, an online lender that also provides the technology to JPMorgan Chase’s digital small-business lending platform, is creating a new subsidiary to pursue partnerships with other banks.
The wholly owned subsidiary will be called ODX, according to New York-based OnDeck.
OnDeck, which specializes in online small-business loans, has been working to build its bank partnership business since announcing its deal with JPMorgan Chase in 2015. The nation’s largest bank launched its QuickCapital platform in 2016.
In recent months, OnDeck has been signaling that it expects to unveil a second bank partnership soon. That deal’s announcement is imminent, a company spokesman said Monday.
OnDeck CEO Noah Breslow said that dozens of the firm’s employees have moved to ODX, which is also recruiting outside talent.
“This is about signaling our commitment to the market, and really scaling up,” he said.
Brian Geary, who previously served as vice president of OnDeck’s partnership unit, has been named president of ODX. Geary said that ODX is focusing on banks that want to offer digital small-business loans, but could expand into other asset classes over time.
The company also announced the hiring of Raj Kolluri, who formerly worked at the financial technology firm SS&C Primatics, to serve as head of product and technology at ODX.
OnDeck, founded in 2006, has made more than $10 billion in small business in the U.S., Canada and Australia. The publicly traded firm, which touts its rapid loan decisions, often lends at relatively high interest rates to companies that do not qualify for credit from banks.
Partnerships with banks could enable OnDeck, which funds its own lending business in the capital markets, to become less vulnerable to a turn in the credit cycle. Under the JPMorgan Chase deal, the $2.6 trillion-asset bank sets the underwriting criteria and holds the Chase-branded loans on its own balance sheet, while OnDeck operates behind the scenes.
Fintech companies that want to license their digital lending technology to banks often lament the slow pace of decision-making inside depositories. Geary acknowledged that banks took a wait-and-see approach in the past, but he indicated that the climate has improved.
“We’re definitely seeing a very strong demand in the market today,” he said.
OnDeck reported net income totaling around $11 million in the first half of 2018 after recording $94.5 million in losses over the previous two years.