The third method of MPL collaboration—technology partnership—allows banks to work with fintech partners that most closely align with the bank’s own customer base and risk tolerance. These partnerships are often win-win scenarios: banks receive access to new methods of lending and increased revenue; MPLs get access to a bank’s CMS, credibility, liquidity from its customer/depositor base and the bank’s institutional knowledge. These relationships can work in three broad ways:
- REFERRAL SOURCES
The fintech company provides a referral service for bank customers, often using an algorithm to match the bank likely to be the best lender based on the customer’s information.
- LENDING RELATIONSHIPS
The fintech company provides a bank with access to its technology platform and
data-driven decision-making criteria. Lending platforms can be customized for different types of loans, including consumer, mortgage and commercial loans.
- TECHNOLOGY PROVIDERS
When a bank does not have the internal resources to develop and/or staff its user interface and lending platform, the fintech provider can provide the lending application and integrate it into the bank’s core system. These often take the form of licensing partnerships.
A community bank headquartered in Boston is a good example of a bank thinking strategically about technology collaboration. With assets of just over $1 billion, this bank partnered with LevelUp and Bottomline Technologies to provide lending services to customers. The bank’s customers can complete the entire loan application and approval process in just under six minutes. There is no need for a branch visit, hardcopy print out or mail-in application.
Customers snap a picture of the barcode on the back of their driver’s license and the personal identification needed for the application is automatically populated on the form. The bank also has a partnership with the New York Currency Exchange (“NYCE”) shared deposit ATM network to allow customers to make deposits and withdrawals at non-proprietary ATMs across the U.S. with zero ATM fees. In addition, the bank offers a high-yield checking account (called “Hybrid”) through a partnership with on-line investment firm Aspiration, and personal loans between $2,000 and $35,000 through its partnership with the Prosper platform.