On Deck Climbs Most Since IPO After Teaming Up With JPMorgan

  • Shares of online loan firm rebound after sliding 60% this year
  • Pricing will be `in line' with typical bank-lending products

On Deck Capital Inc. surged the most since its initial public offering after JPMorgan Chase & Co. said it’s collaborating with the company to provide loans to small businesses over the Internet.

The stock rose 35 percent to $12.16 at 9:53 a.m. in New York, the best performance in the Russell 2000 Index, after sliding 60 percent this year through Tuesday. On Deck went public Dec. 16 at $20 a share.

JPMorgan, the biggest U.S. bank, is working with On Deck to dramatically speed up the process of providing credit to some of the lender’s 4 million small-business customers, Bloomberg reported Tuesday. More large financial firms are working with online 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.

“We’re working with On Deck to build a new Chase lending product that will be launching in 2016 for small-dollar loans to our small-business clients,” Jennifer Piepszak, JPMorgan’s head of business banking, said Tuesday in a phone interview. “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.”

Disruptive Technology

JPMorgan had weighed whether it should build a similar product in-house before ultimately deciding to work with On Deck, Piepszak said. It’s part of a broader discussion among banks’ executives over whether to collaborate or compete with potentially disruptive technology firms.

On Deck says it uses a proprietary assessment of creditworthiness that pulls in more and better data than banks do.

“The loans will use Chase pricing, in line with a typical bank-lending product,” said Trish Wexler, a JPMorgan spokeswoman.

Small business loans that currently take days or weeks to be funded could be made within hours or a day, Piepszak said. The product will carry the Chase brand and is expected to be rolled out in a pilot program next year, she said. Small-dollar credit typically refers to loans of less than $250,000.

‘Pain Points’

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

JPMorgan Chief Executive Officer Jamie Dimon signaled that a partnership was in the works earlier Tuesday during a panel discussion in Washington. The new ventures offer “the kind of stuff we don’t want to do or can’t do, but there’s somebody else who can do it and do it probably well,” he said. Online firms use a broad amount of non traditional data to “determine whether someone is a good credit or not,” he added.

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