Fintech strikes again; Regions partners with start-up

October 05 00:48 2015

In a deal that highlights the rising influence of Silicon Valley on finance, Regions Financial, which operate bank branches across 16 states, plans to partner with lending start-up Fundation to provide online loans to small businesses. The partnership, due to be announced Monday, will give the publicly traded Regions, valued at $11 billion, a new online banking presence. It will give Fundation access to Regions’ small-business customers in a deal that could double the start-up’s revenue.

“We expect it will at least double (loan) originations and revenue” as a result of the partnership, CEO Sam Graziano said. He declined to provide revenue numbers for the privately held company, which is backed by private equity firm Garrison Investment Group. The union comes as banks of all sizes — including Wall Street behemoth Goldman Sachs — look for ways to compete with the rise of online lenders — an increasingly crowded field that now includes LendingClub, OnDeck, Fundation and FundingCircle.

Online lenders present a threat to traditional banking because they face less cost and regulation. They can also provide loan guarantees faster than brick-and-mortar lenders. Goldman Sachs predicts that the emerging financial technology industry, dubbed fintech, threatens to grab $4.7 trillion in revenue and $470 billion in profits from traditional Wall Street firms. That includes not just lending, but also payment transactions and even investment advice.

It’s not just talk, either. Goldman CEO Lloyd Blankfein in May told staff that the behemoth investment bank is working on its own online lending product for consumers. “The firm has identified digitally led banking services to consumers and small businesses as an area of opportunity,” Blankfein’s letter said. For Regions, the quest to find an online partner started last year after it conducted a survey of customers and found close to 20% “were using online alternatives other than Regions,” said Joe DiNicolantonio, head of Regions business banking unit.