From Competition to Collaboration: Partnerships in Online ......Partnership Models for Online...
Transcript of From Competition to Collaboration: Partnerships in Online ......Partnership Models for Online...
• Noah Breslow, CEO, OnDeckLendIt | April 12, 2016
Noah Breslow, CEO, OnDeck LendIt | April 12, 2016
From Competition to Collaboration: Partnerships in Online Lending
Agenda
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Evolution of Online Lending
Partnerships in Online Lending
Looking Ahead
?
How has the online lending industry
evolved in the last few years?
Are innovators and incumbents better off
working together?
What industry changes are likely in
the future?
Evolution of Online Lending
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Marketplace Lending: Three Phases of GrowthEarly platforms had to contend with the Great Recession and low awareness
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Low Awareness Skepticism Stampede
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Stampede – Innovator PerspectiveExplosion of FinTech funding has made all marketplace lending categories more crowded
5Image Credits: Citi Digital Disruption Study, Orchard Lendscape 2016
Stampede – Incumbent PerspectiveWave of digital disruption will substantially impact traditional banking revenues over the next 10 years
6Image Credits: Citi Digital Disruption Study
The Stampede Puts Pressure on Both Innovators and Incumbents
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Incumbents • Grow/preserve market
share • Improve customer
experience • Expand product offering • Validate growth/tech
orientation
Innovators • Grow market share • Leverage proprietary
data • Control acquisition
costs • Validate company/
category
Partnerships in Online Lending
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© Copyright 2014 OnDeck. All rights reserved. Confidential & Proprietary
Incumbent Models for Entering Online Lending
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Build Buy Partner
PROS
CONS
Proprietary
Expensive, time-consuming
Control over already-built platform
Expensive, integration risk
Leverage existing platform, time / cost to market
Shared control and substantial coordination required
Why Innovator / Incumbent Partnerships are Happening
10Source: “The Brave 100: The Battle for Supremacy in Small Business Lending.” Frank Rotman and Oliver Wyman. October 2015.
Notable Partnerships to Date
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Non-Bank Partnerships Bank Partnerships
• Provide complete solution for partner’s customers
• Accelerate sales of another product
• Serve historically unmet need of bank’s customers
Partnership Models for Online Lending
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Referral
“Platform Only”
“As A Service”
Incumbent Innovator
MarketingSales Underwriting Funding
RevenueModel
Marketing Sales Underwriting
Technology
Marketing Funding
Sales Underwriting
Incumbent earns referral fee
Innovator earns platform licensing
fee
Innovator earns origination and servicing fees
Funding Servicing
Servicing Technology
Servicing Technology
© Copyright 2015 OnDeck. All rights reserved.
Partner Spotlight: OnDeck & Chase ! “Lending as a Service” Model
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Back End: Integration
Chase’s Business Banking deposit
and lending platform
OnDeck tech platform and OnDeck
Score®
Front End: Funding in a Few Clicks
• Customized offers based on bank data • Real-time approvals • Same or next-day funding
Debunking Partnership Myths
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Customer Profile:
Compliance:
Security:
Customer Experience:
Regulator Perspective:
Myth Reality• Customers are choosing online lenders first • Appropriate for both well-served and underserved markets
• Online lenders comply with myriad federal & state laws • Partnerships must pass muster with banking regulators
• Partnerships can be constructed to silo personal information • Platforms are investing in data security and fraud prevention
• Seamless customer experience, either through co-branded referrals or a white-labeled integration
• Great service can be provided via online/mobile channels
• OCC: “We are making certain that institutions with federal charters have a regulatory framework that is receptive to responsible innovation along with the supervision that supports it.”
Incumbents Care Deeply About Their Customers… but so Do Innovators
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response
work rateloan professionalapplication interest thing
funding process easy ease company
businessfast service deck simple
excellent betteritquicktime
repcustomer greatcustomer service good
lower
experience speedhelpful help
5 Things to Look for in a Marketplace Lending Partner
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Financial Stability1
Technology Prowess
Regulatory Compliance
Proven Credit Model
Blue-chip Customer Experience
2
3
4
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Looking Ahead
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Marketplace Lending: Three Phases of Growth…
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Low Awareness Skepticism Stampede
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Leading to a Fourth Phase: Shakeout & Mainstream Adoption
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• Total number of marketplace lenders may decrease
• Scaled/viable marketplace lenders to continue growing
• Traditional lenders to increase participation
• Consumer adoption continues to trend up
Image Credit: 2003 Dent Foundation. Smart Business “Life Cycle Metrics”.
Innovation
Growth Boom
Shake-out
Maturity Boom
10%
50%
90%
The Industry Life Cycle
Surviving the Shakeout Phase
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Stability Scale Partner Prowess
• Financial profile • Credit performance • Access to capital • Growth discipline
• Cost benefits • Virtuous cycle • Consolidator option
• Reach scale faster • Better data / decisions • Regulatory support • Proven solution
Looking Ahead to LendIt 2020
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• Banks increase rate of branch closures
• Complex transactions / relationships move out of the branch
• Non-bank tech companies become bigger players in financial services
• Online lenders power much of this through partnerships
LendIt 2016 Booth #103
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