The Customer Effect

One year in: How JPMorgan is transforming small-business lending

  • Chase is among the third top lender of Small Business Administration loans by unit in the U.S.
  • It was one of the first banks to embrace a partnership-type relationship with a fintech startup, at a time when the industry narrative still focused on startups’ potential to displace banks
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One year in: How JPMorgan is transforming small-business lending

For JPMorgan Chase, small business is big. The bank is the third top lender of Small Business Administration loans by unit in the U.S.

As of May, Chase approved 2,375 loans in 2017 for a total $679 million. But beyond SBA loans, the bank also extended more than $24 billion in credit to 4 million small business customers in 2016 through its business banking, Ink from Chase credit card and commercial term lending. In each of the last four years, it’s extended more than $19 billion in new small business loans.

It’s a market not without its pressures. After the recession, the largest U.S. banks, Chase itself included, halted most of their small business lending, later creating the opportunity for online lenders to enter the market — like Bond Street or OnDeck. Last year, JPMorgan began using OnDeck’s technology for its Chase Business Quick Capital product, a  short-term, quickly funded small business loan. It was one of the first banks to embrace a partnership-type relationship with a fintech startup, at a time when the industry narrative still focused on startups’ potential to displace banks.

“When we think about strategy and product we are very focused on customer experience. If there isn’t a problem worth solving we shouldn’t be in that space. We really wanted to provide a simple and fast experience for our customers to access capital when they needed it,” said Julie Kimmerling, head of Chase Business Quick Capital and a senior manager on the business banking strategy and business development team.

Tearsheet caught up with Kimmerling about small business lending in a digital age and the OnDeck partnership. The following has been edited for length and clarity.

In your six years at Chase, how has small business lending changed?
There is a tremendous amount of data available on customers that is also becoming increasingly digitized and simultaneously, theres a lot more computing power available. Our ability to use that data that’s becoming more centralized has allowed us to think about how you envision credit in a different way. A lot of that has occurred over the last 10 years or so.

Small business lending isn’t alone there.
Lending has benefited, payments has benefited — even more generally, banking services and wealth management have benefited. Retail disruptors like Apple or Amazon have fundamentally changed the way people interact with digital experiences and tech. Consumers and small business owners have basically been able to demand different outcomes from their banks and lenders.

Did that help create the opportunity for lending startups?
All of that together was a perfect storm for a lot of online lenders. [Customers] were demanding changes to the way they experienced banking, and we had to change with those trends. It makes a lot of sense that Chase came into the online lending space — we even went a couple steps beyond what some of the fintechs have done. We have a simpler experience.

You began using OnDeck’s technology a little over a year ago. How’s it going?
We’re pleased with the simplified customer experience we are able to offer our customers with Chase Business Quick Capital. Additionally, our experience with it has also given us tons of ideas of how we can leverage our experience here to make more of our lending products even faster and even simpler. We took a problem that was incredibly difficult with a tremendous amount of process associated with it — universally across the industry it was a difficult customer experience — and we turned it into something that was easy to use.

How fast and simple are we talking?
We’ve provided our small business customers with a process that enables them to access credit when they need it. By using data from their existing relationship with us we’re able to pre-score them. When they actually apply for the loan they click through six screens and are able to check out the loan. We can fund the proceeds of the loan into their account the same business day. In the past it could take weeks if not over a month for decisioning and we’ve taken that down to near real time decisioning. They don’t have to submit any additional documentation.

Are those elevated consumer expectations starting to translate to your small business customers?
Every single small business owner is a consumer. Everything that affects the retail space is already a shared demand for our small business owner. In lending we think of ourselves as being near the forefront. With Chase for Business, we’re trying to pioneer the easiest banking experience across multiple areas.

The legacy-startup dynamic has changed in the last three years. OnDeck aside, do you feel Chase competes with the startups?
“Us versus them” is not the perspective JPMorgan Chase takes. In some cases we’ll still determine we’re best positioned to develop the technology ourselves. It’s no secret how much we spend on tech.

How about one of the other technology or retail disruptors?
The narrative is about where it makes business sense. We will absolutely think about being partners and working together instead of always having this narrative of “us versus them.” We always evaluate our path forward based on the use case and determine if we should buy, build or partner.

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