After watching digital upstarts disrupt traditional financial services over the past decade, it was inevitable some established firms would finally respond. Last December, for example, JP Morgan Chase, rated the largest U.S. bank by total assets, disclosed that it will leverage OnDeck’s small business lending platform for a new program launching in 2016.
As the Wall Street Journal observed, that partnership will help the older bank “process applications more inexpensively and quickly, in hours instead of weeks.”
Pamela Rice, senior vice president of technology for OnDeck, says the 8-year-old lending innovator recognized that traditional banks might not be willing to take the time to reposition their existing platforms for the digital lending environment, so it built its architecture not only to run its own lending program but also for use as a platform-as-a-service.
A World Economic Forum report in 2015 on the impact of disruptive innovations on the financial services industries asserts in its key findings that “Innovations are having the greatest impact where they employ business models that are platform based, data intensive, and capital light.”
Scale very, very quickly
Rice, who joined the firm in 2014 from PayPal, where she headed credit underwriting and global technology, has a similar outlook. “Owning data and owning your platform and being able to extend that into new spaces is all part of the puzzle,” she says. “This is where I think traditional lenders get a bit tied up with just being able to build it fast and secure, but not focusing as much on how to scale going forward. I don’t want to ever get into a situation where we can’t scale very, very quickly.”
Rice says that OnDeck’s focus on technology and embedded analytics is a game changer and key differentiator in small business lending. She views the company’s technology capabilities as building blocks to help inspire the business to create the next set of financial products to bring to market where needed, when needed.
One such building block is a merchant event history that tracks every conversation and communication with a customer. “We can use that lookup to really understand where the customer has reached out to us, where we’ve reached out to them, any channel we’ve ever seen them and every action we’ve taken,” she explains. “That’s super helpful from a business perspective.”
The building block approach is also instrumental in growth and expansion. In 2015 and 2014, that included launching its first overseas operations in Australia and Canada, respectively. The key, Rice says, is “to have those building blocks and infrastructure in place so if I want to launch in Country Number 4, it will take a fraction of the time it took to roll out Country Number 3.”
Rice says an important delineator separating those who can scale from those who can’t is the ability to automate as much as possible. “When I talk about things as simple as how do I build out an environment so that I can test things, that needs to be a push-button function, not something that takes me three-to-four weeks.”
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