JPMorgan Ceases OnDeck SME Lending Partnership
(United States - 29 July 2019) JPMorgan has concluded its three year partnership with OnDeck Capital that enabled the bank to offer specialised online lending to Small and Medium Sized Enterprises (SMEs).
OnDeck announced that JPMorgan plans to stop originating loans through the partnership noting that JPMorgan will continue to offer online small-business loans but will no longer do so in partnership with OnDeck. Under the partnership which launched in April 2016, OnDeck shared its technology with JPMorgan while the Bank set the underwriting criteria for the Chase-branded loans.
OnDeck CEO Noah Breslow called the JPMorgan’s decision ‘a setback’ with OnDeck incurring a US$900,000 impairment charge in Q2 2019 for technology that supported JPMorgan loan originations. The company confirmed that it will continue to service previously originated JPMorgan loans for up to two years. OnDeck also offers loans to small businesses through its own website. The firm has sought to use the JPMorgan partnership as the foundation of a separate business unit that provides technology to banks.
OnDeck separately announced that it plans to pursue a bank charter, either by applying for one directly or by acquiring a bank. CEO Noah Breslow said that the company concluded that benefits of becoming a bank, which include a lower cost of funding, greater regulatory certainty and the ability to offer more products, outweigh the costs.
OnDeck has not revealed a schedule for becoming a bank or state which type of bank charter it might pursue however OnDeck does not plan to pursue a fintech charter.
“It’s been a great collaboration with OnDeck. They helped us create and launch an online loan application process that gave business owners faster decisions and easier access to credit, something we will continue to do on our own platform” JPMorgan stated in a written statement.
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