• Noah Breslow, CEO, OnDeck

LendIt | April 12, 2016

Noah Breslow, CEO, OnDeck

LendIt | April 12, 2016

From Competition to Collaboration:

Partnerships in Online Lending

Agenda

2

Evolution of

Online Lending

Partnerships

in Online Lending

Looking

Ahead

?

How has the online

lending industry

evolved in the last

few years?

Are innovators and

incumbents better

off working

together?

What industry

changes are likely in

the future?

Evolution of Online Lending

3

Marketplace Lending: Three Phases of GrowthEarly platforms had to contend with the Great Recession and low awareness

4

Low

Awareness Skepticism Stampede

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Stampede – Innovator PerspectiveExplosion of FinTech funding has made all marketplace lending categories more crowded

5Image Credits: Citi Digital Disruption Study, Orchard Lendscape 2016

Stampede – Incumbent PerspectiveWave of digital disruption will substantially impact traditional banking revenues over the next 10 years

6Image Credits: Citi Digital Disruption Study

The Stampede Puts Pressure on Both Innovators and Incumbents

7

Incumbents

• Grow/preserve market share

• Improve customer experience

• Expand product offering

• Validate growth/tech orientation

Innovators

• Grow market share

• Leverage proprietary data

• Control acquisition costs

• Validate company/category

Partnerships in Online Lending

8

© Copyright 2014 OnDeck. All rights reserved. Confidential & Proprietary

Incumbent Models for Entering Online Lending

9

Build Buy Partner

PROS

CONS

Proprietary

Expensive, time-consuming

Control over already-built

platform

Expensive, integration risk

Leverage existing platform,

time / cost to market

Shared control and substantial

coordination required

Why Innovator / Incumbent Partnerships are Happening

10Source: “The Brave 100: The Battle for Supremacy in Small Business Lending.” Frank Rotman and Oliver Wyman. October 2015.

Notable Partnerships to Date

11

Non-Bank Partnerships Bank Partnerships

• Provide complete solution for partner’s

customers

• Accelerate sales of another product

• Serve historically unmet need of

bank’s customers

Partnership Models for Online Lending

12

Referral

“Platform

Only”

“As A Service”

Incumbent Innovator

Marketing

Sales

Underwriting

Funding

Revenue

Model

Marketing

Sales

Underwriting

Technology

Marketing

Funding

Sales

Underwriting

Incumbent earns

referral fee

Innovator earns

platform licensing

fee

Innovator earns

origination and

servicing fees

Funding

Servicing

Servicing

Technology

Servicing

Technology

© Copyright 2015 OnDeck. All rights reserved.

Partner Spotlight: OnDeck & Chase “Lending as a Service” Model

13

Back End: Integration

Chase’s Business

Banking deposit

and lending

platform

OnDeck

tech platform

and OnDeck

Score®

Front End: Funding in a Few Clicks

• Customized offers based on bank data

• Real-time approvals

• Same or next-day funding

Debunking Partnership Myths

14

Customer Profile:

Compliance:

Security:

Customer Experience:

Regulator Perspective:

Myth Reality

• Customers are choosing online lenders first

• Appropriate for both well-served and underserved markets

• Online lenders comply with myriad federal & state laws

• Partnerships must pass muster with banking regulators

• Partnerships can be constructed to silo personal information

• Platforms are investing in data security and fraud prevention

• Seamless customer experience, either through co-branded

referrals or a white-labeled integration

• Great service can be provided via online/mobile channels

• OCC: “We are making certain that institutions with federal charters

have a regulatory framework that is receptive to responsible

innovation along with the supervision that supports it.”

Incumbents Care Deeply About Their Customers… but so Do Innovators

15

response

workrate

loan professionalapplication interest

thing

funding process easy ease company

businessfast service

deck simple

excellent betteritquick

timerep

customer great

customer servicegood

lower

experience speedhelpful

help

5 Things to Look for in a Marketplace Lending Partner

16

Financial Stability1

Technology Prowess

Regulatory Compliance

Proven Credit Model

Blue-chip Customer Experience

2

3

4

5

Looking Ahead

17

Marketplace Lending: Three Phases of Growth…

18

Low

Awareness Skepticism Stampede

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Leading to a Fourth Phase: Shakeout & Mainstream Adoption

19

• Total number of marketplace

lenders may decrease

• Scaled/viable marketplace

lenders to continue growing

• Traditional lenders to increase

participation

• Consumer adoption continues to

trend up

Image Credit: 2003 Dent Foundation. Smart Business “Life Cycle Metrics”.

Innovation

Growth Boom

Shake-out

Maturity

Boom

10%

50%

90%

The Industry Life Cycle

Surviving the Shakeout Phase

20

Stability Scale Partner Prowess

• Financial profile

• Credit performance

• Access to capital

• Growth discipline

• Cost benefits

• Virtuous cycle

• Consolidator option

• Reach scale faster

• Better data / decisions

• Regulatory support

• Proven solution

Looking Ahead to LendIt 2020

21

• Banks increase rate of branch

closures

• Complex transactions / relationships

move out of the branch

• Non-bank tech companies become

bigger players in financial services

• Online lenders power much of this

through partnerships

LendIt 2016

Booth #103

$4B+delivered

to small

business