Lenders Avant and On Deck spin out new platform businesses

Fintech is often viewed through the challenger, disruptor lens. But more often than not, fintech is an incubation vehicle for banking proof-of-concepts. Not many banks deeply, organisationally get this. Even their Corporate Venture Capital arms struggle to deliver. If they did, the pace of banking innovation would be tremendous. It’s not.

But fintech lenders like On Deck and Avant do, and are now in the maturity phase of their fintech lifecycle that this ‘incubation’ phase is starting to produce white label opportunities for their proprietary technology.

Small business lender On Deck has launched ODX, a separate company that helps banks build digital SME lending products, while personal loan startup Avant is taking a similar tack, launching a new infrastructure platform called Amount that will help banks build digital consumer lending products.

Many startups struggle with the white label or disrupt model early on in their lifecycle. White-labelling is often appealing when cash flow is tight, and the hurdle to achieve market share seems overwhelming.

But as On Deck and Avant have shown, if you time things correctly, it really is possible to do both – and do them well. On Deck for example has originated over $10 billion in loans since 2006 and Avant has issued over 750,000 personal loan, auto loan and credit card products through its technology platform.

The financial institution of the past obsessed about owning the customer at every step of the financial journey. The fintech first financial institution of the future possibly cares less about that, and more about owning the technology layer.

What is interesting is that beyond one to one partnerships with banks, of which both Avant and On Deck have established in the past, both fintechs see a business case in creating a platform strategy and business line specifically focused on this area. This suggests a fundamental shift in attitudes in banks to work with alternative technology platform providers who are also, in many senses competitors.

Daily Fintech Advisers provides strategic consulting to organizations with business and investment interests in Fintech. Jessica Ellerm is a thought leader specializing in Small Business and the Gig Economy and is the CEO and Co-Founder of Zuper, a new superannuation startup in Australia.

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