• Noah Breslow, CEO, OnDeckLendIt | 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

MarketingSales Underwriting Funding

RevenueModel

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

work rateloan professionalapplication interest thing

funding process easy ease company

businessfast service deck simple

excellent betteritquicktime

repcustomer greatcustomer service good

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

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