CIBC, Scotia deepen ties with fintech player
THINKING CAPITAL
Canadian Imperial Bank of Commerce and Bank of Nova Scotia are stepping up their involvement with fintech firm Thinking Capital, the latest example of deepening ties between Canada’s big banks the financial technology firms that are increasingly challenging them on their own turf.
The two banks are more than doubling the credit facility of the online small business lender to $125 million, which will allow the Montreal- based firm to extend more loans, says Jeff Mitelman, chief executive of Thinking Capital.
“We’ve seen a 40 per cent year- over- year increase in financing demand,” Mitelman said, adding that the increased debt facility “reinforces that the financial community recognizes the benefits of fintech in the Canadian marketplace.”
In November, Thinking Capital and CIBC built on their existing lender- borrower relationship to forge a referral partnership that promotes the fintech firm’s lending business on CIBC’s website.
Businesses apply online for the loans of between $5,000 and $300,000, which can be received in as little as 24 hours, according to the bank’s website.
Thinking Capital has extended $ 400 million in loans to 10,000 businesses across Canada since it was formed 10 years ago. Mitelman said in an interview Monday that the growth has been “exponential” since the major banks got involved in providing credit 18 months ago, particularly since CIBC and Thinking Capital formed the “transformative” referral partnership last year.
“We were operating very strongly before and it’s been exponential growth to the business we had previously,” Mitelman said.
The small business loans are funded through a combination of Thinking Capital’s credit facility and operating capital derived from the day- to- day running of the business.
CIBC executives said last year that the referral arrangement is intended to offer options for business banking customers—a group that has traditionally found it tough to get financing from the big banks — and, ultimately, to help the bank forge new business and personal banking relationships.
In t he past couple of years, banks have begun to face competition from dozens of so- called fin-techs, f i rms t hat use f i nancial technology and data to offer faster online access to traditional banking products and services such as loans and payments.
The upstarts are much smaller, but they compete by using new technology and readily available online data, and are therefore seen as a threat to traditional banks bound by legacy technology and business structures.
The banks have been spending heavily on technology of their own, while cutting traditional costs where they can.
Bank of Montreal, f or instance, took a $ 132 million after- tax restructuring charge in the latest fiscal quarter to cover severances to reduce its workforce by four per cent as customers shift to more mobile and online banking.
But bank executives are i ncreasingly l ooking to fintech rivals not just for the challenges they pose, but for opportunities.
“We look at the fin-techs both competitors and potential partners,” Victor Dodig, the chief executive of CIBC, said on a conference call with analysts last week.
“If CIBC is to stay relevant, we need to adopt new technologies and look for secure, more flexible ways to service our clients,” he said, adding that he sees opportunities to access leadingedge technologies and innovate by working “side by side” with fintech firms.
On the same conference call, David Williamson, head of retail and business banking at CIBC, said Canada’s fifth- largest bank teamed up with a fintech firm on global money transfers in a partnership that allowed the bank to drop its fee for sending a wire without changing the profitability of the business.
The change in the cost of the transaction “occurred as a result of working with a fintech,” Williamson said.