As online lenders have struggled with high CAC and lack of scale, many of them have turned to white-labeled LaaS solutions for banks. American Banker discusses why such partnerships such as OnDeck and JP Morgan's while seemingly intuitive, have not become ubiquitous.
Partnerships between banks and online lenders can take different forms, but the deals often enable banks that have long relied on old-fashioned loan applications to move into the digital age. For companies that were pioneers in online small-business lending, there are a couple of key rationales for seeking to ink partnerships with banks. First, banks have ready access to small-business customers, which can be expensive for online lenders to acquire on their own. And second, the software industry benefits from economies of scale — each additional customer adds little to the software maker’s costs — which offers the potential opportunity to earn far bigger margins than are typical in the lending industry.