First West Credit Union is jumping into the financial technology world by partnering with online loan provider Grow.
Fintech companies, such as online lenders, robo-advisers and mobile payment processors, have generally been seen as disruptors to traditional financial service companies. But the announcement between Grow and First West has swung the pendulum for retail banking and shows that large financial institutions could benefit by embracing startup services.
"The way Canadians access and use financial services is rapidly changing," Launi Skinner, chief executive officer of First West, said in a statement. "We want to lead these changes to ensure we're providing our members with the services they want and need."
Grow, formerly known as Grouplend, is known as a marketplace lender and connects accredited investors with individuals looking to borrow. Loans are typically approved within 24 hours and funds are deposited directly into an applicant's bank account without clients having to leave their home. For borrowers, Grow's interest rates range from 5 per cent to 17 per cent (with the average rate hovering around 10 per cent).
The partnership with First West is just one of many in the pipeline for Grow, which plans to announce several more partnership agreements in the coming weeks. The lender says it will be partnering with several financial-service companies in a variety of sectors including insurance, investment and wealth management, and retail banking.
Last year, Grow raised $10.2-million in financing that was led by Markus Frind, founder of dating site Plenty of Fish, and Lance Tracey, founder of cloud services company Peer 1 Hosting. Since launching 16 months ago, the lender has processed nearly $1-billion in loan applications.
The partnership with First West will provide credit union members with a faster, and potentially cheaper, loan product while Grow will gain access to wider pool of clients – one of the bigger challenges for fintech companies in Canada.
"The biggest struggle we have is broad awareness," says Kevin Sandhu, CEO and founder of Grow. "Our target customer doesn't necessarily know that we exist, and more than that, our target customer doesn't necessarily feel that they want to move away from traditional financial services where they received a reliable and trusting relationship."
Mr. Sandhu says not all partnerships will include their loan offering. Some institutions are interested in leveraging Grow's analytics, which can identify possible selling opportunities for certain client segments. For example, clients who may have insurance needs or are spending too much on ATM fees and could benefit from a better banking package.
Over the past six months, many of the five big banks have been keeping a close eye on the emerging fintech players.
Recently, both Canadian Imperial Bank of Commerce and Bank of Nova Scotia appointed technology talent to their board of directors and Royal Bank of Canada appointed a head of innovation and technology while Bank of Montreal brought in a U.S executive who will be responsible for heading BMO's digital agenda, including online and mobile capabilities.
During the same period, Mr. Sandhu has been contacted by interested buyers, both within and outside Canada.
"Big banks are not only looking to buy the technology that is being developed, but they are also looking at scooping up the startup teams that developed the technology," Mr. Sandhu says. "For us that is not an option we would consider – we are more than open to partnering with those players but we are not up for sale at this time."
CIBC was the first bank to gain momentum in the fintech space last fall with its partnership announcement with Thinking Capital – an online lender for small-business loans.