J.P. Morgan Enters Online Loan Boom
December 01 2015 - 6:51PM
Dow Jones News
By Peter Rudegeair and Emily Glazer
The largest U.S. bank is hopping on the online-lending
bandwagon.
J.P. Morgan Chase & Co. is partnering with OnDeck Capital
Inc. on a new type of small-dollar loan product designed for the
bank's small-business customers, said Jennifer Piepszak, the bank's
chief executive for business banking, in an interview. For
businesses, small-dollar loans generally refer to those that are
less than $250,000.
The new product will be available over the Internet to some J.P.
Morgan Chase clients starting in 2016, she added.
Many details of the arrangement still need to be worked out, but
the product will be marketed under the brand of J.P. Morgan Chase,
according to a person familiar with the matter.
The announcement from the largest U.S. bank by assets
underscores how credit to individuals and businesses is
increasingly being provided by online upstarts. At least 100
specialty small-business lenders have launched in the U.S. in
recent years, according to Frank Rotman, a founding partner of
venture-capital firm QED Investors.
Online lenders extended $4.6 billion in small-business loans in
the U.S. in 2014, a figure that is forecast to grow to $47 billion
in 2020, according to analysts at Morgan Stanley.
In many cases they are entering a market where many banks have
retreated. Ten of the largest banks offering small loans to
businesses extended $44.7 billion in credit in 2014, down 38% from
their 2006 volume.
This partnership follows J.P. Morgan's increasing focus on
growing its small business unit. Ms. Piepszak, named chief
executive of Chase Business Banking in January, got her role with
the understanding that the unit had a big opportunity to cross-sell
small business banking, credit card and payment processing services
that could lead to hundreds of millions of dollars in additional
revenues.
The bank's operating committee, led by Chairman and Chief
Executive James Dimon, asked for a corporate strategy report
outlining those opportunities following its annual off-site retreat
last summer.
Mr. Dimon said at a Treasury Department conference Tuesday
morning that the bank's small business unit was partnering with a
peer-to-peer type of lender. He said on a panel about financial
inclusion that some new technology will be good for the market and
nontraditional data will help determine if someone has good
credit.
OnDeck, one of the largest online lenders to focus on small
businesses, went public last December. Its shares have fallen 52%
since the start of the year, while shares in J.P. Morgan are up 8%
over the same period.
Write to Peter Rudegeair at Peter.Rudegeair@wsj.com and Emily
Glazer at emily.glazer@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires
(END) Dow Jones Newswires
December 01, 2015 18:36 ET (23:36 GMT)
Copyright (c) 2015 Dow Jones & Company, Inc.
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