CIBC, online lender forge fintech deal
In the latest of a wave of partnerships between big banks and tech startups, Canadian Imperial Bank of Commerce has teamed up with Thinking Capital, an online provider of loans to small business.
CIBC, Canada’s fifth-largest bank, says the referral partnership is “a first from a major Canadian bank.” Small businesses will get rapid decisions on loans between $5,000 and $300,000. And, as is typical from a new crop of alternative online lenders challenging the big banks, funds will be provided “in a matter of days, not weeks.”
Loans approved through Thinking Capital’s platform will be funded by the startup, but incentives will be offered for business owners to move their business banking to CIBC.
“This partnership is about leveraging innovation to broaden the options for our existing business clients, and attract new business and personal banking relationships to CIBC,” said Jon Hountalas, executive vice-president of CIBC business and corporate banking.
Traditional banks are facing threats from a variety of fintech firms, companies using financial technology to compete in business lines including lending and payments. Though the upstarts are much smaller, their ability to use new technology and reams of online data to compete in traditional banking strongholds is seen as a longer-term threat.
As a result, while online digital technology is often viewed as disruptive, banks are increasingly choosing to join rather than fight it.
As CIBC made clear Wednesday with its arrangement, for example, the new business lending option is intended to be complementary to the bank’s traditional forms of small-business financing.
The partnership with Thinking Capital was announced the same week mobile payments via Apple Pay arrived in Canada for American Express cardholders. Also on Wednesday, a fintech partner of Royal Bank of Canada revealed the Canadian bank is experimenting with Bitcoin’s blockchain technology, which could lead to a loyalty rewards program that spans business lines across the bank.
Technology is transforming the economy and sectors from transportation, to banking, to energy, and it is “fundamentally changing business models,” Dave McKay, chief executive of Royal Bank, said at a fintech roundtable discussion convened in Toronto by RBC, on Wednesday.
During the discussion Chris Finan, chief executive of Silicon Valley-based startup Manifold Technology, who is working with RBC, said the backbone of virtual currency Bitcoin — blockchain — could be co-opted as a “synchronization platform” for a cross-bank rewards program.
“It’s pretty early in the blockchain era,” Finan said, adding that Manifold and the banks the startup is working with are looking for “low-hanging fruit” as experimentation continues with the transaction-tracking technology.
Banks view fintech plays as a way to keep up, but also to differentiate themselves from other traditional financial services companies.
Canadian banks, for example, are competing with different digital “wallets” and other mobile technology aimed at retaining or winning customer loyalty.
“Everyone’s trying it — that’s why there’s no great ‘wallet’ yet,” said Linda Mantia, vice-president of digital payments and cards at RBC. One area where collaboration among banks will and should take place, however, is in the security of the system, she said.
“We’re all working together,” Mantia said during RBC’s fintech panel discussion.
Security of personal and financial information is key for Canadian banks if they offer customers the option of using Apple Pay.