An Ontario-based financial institution is looking westward to B.C.’s financial technology (fintech) scene to connect with Millennials.
Alterna Bank is partnering with Vancouver’s Lendful to provide the online lending service with up to $15 million in backing, the company announced January 6.
“Having an institution like Alterna on board is a real win and that really sets us apart from the others standing in the market right now,” Lendful CEO Alex Benjamin told Business in Vancouver.
“The size of the deal shows how serious we are about what we’re doing.”
Lendful describes its application process as more pared-down than those used by banks. It uses an algorithm to calculate risk of potential clients when providing loans of up to $35,000 within 24 hours.
The company said it has reviewed $20 million in loan application since it approved its first loan in September 2015.
Vancouver’s fintech scene has grown rapidly since 2011 with 24 startups focused on financial services that compete with banks having launched over the past five years.
But the rapid growth has not been a boon for all startups offering online loan services like Lendful’s.
Mogo’s (TSX:GO) initial public offering in June 2015 raised $50 million when its shares hit the markets. Since then, its opening share price of $10 has dropped to $3.35 as of Wednesday morning (January 6).
“We’re not seeing the growth of fintech as a threat. We’re really embracing it,” Alterna Bank CEO Rob Paterson said.
“There will be benefits from Alterna in being able to understand the technology, being able to use some of the technology down the road to run through with Alterna Bank and to provide our customers with some of the same capabilities with (Lendful’s) software.”
While Paterson would not reveal further financial details of the deal, he said the arrangement was long-term in nature.
“We’re not looking to make a fortune at this. We’re really wanting to connect better through the Millennial space and we think (Lendful) has the best solution in the marketplace in the consumer lending area.”
Lendful isn’t the only Vancouver-based fintech to partner with a notable financial institution recently.
On December 14, online identity verification service Trulioo announced it raised $15 million in venture capital as part of its efforts to bring its flagship product into the banking industry.
Money raised in that funding round included capital from new partner American Express Ventures.
Trulioo president Jon Jones told BIV in December having a recognizable financial institution as part of its funding round “gives a lot of weight in terms of the merits that the banking industry can see and the value of our capabilities as well.”
Jones said his company has about 30 employees and that part of the money raised would go to expanding its workforce by about 60% in the coming year.
Benjamin said he plans to nearly double his team of about a half-dozen at the company’s Gastown office over the next month, in part, from using the money Alterna is providing in the deal.@reporton