Bank of Nova Scotia is pairing with online lender Kabbage to offer small business loans in the latest example of how traditional banks are working alongside so-called "fintech" startups to boost their digital offerings.
The partnership will allow Scotiabank customers in Canada and Mexico to apply for small business loans of up to $100,000 using Kabbage's technology platform.
The service will be available – beginning in July in Canada and in Mexico in August – to existing Scotiabank small business customers who are not currently borrowing from the bank.
The bank also plans to expand the service to all Canadians by early next year, and also hopes to launch the offering in Colombia, Chile and Peru in the future.
Kabbage uses data analytics to determine a borrower's creditworthiness in minutes, removing the need to visit a bank branch, fill out paperwork and wait days for a decision.
Scotiabank had previously invested in Kabbage, which has its headquarters in Atlanta.
It's not the first time that one of the big Canadian banks has partnered with a financial technology upstart.
Late last year CIBC announced a partnership in the small business online lending space with Montreal-based Thinking Capital.
Others, such as the Bank of Montreal, have opted to build their own financial technology platforms in house.
Earlier this year, BMO launched an online portfolio manager, making it the first of the "Big Five" Canadian banks to get into the so-called "robo-adviser" business.
A report published by business consultancy firm EY earlier this year predicted that adoption rates of fintech offerings could triple this year, making it important for traditional banks to innovate or risk losing market share.
Industry insiders have predicted that banks will look to partner with existing fintech companies, rather than building their own systems from scratch.
"What we've found is that going to somebody who has already thought through the customer experience is a great way to get to market a lot faster," Jeff Marshall, head of Scotiabank's digital factory, said Wednesday.
Marshall said there is a team within Scotiabank's digital factory that is constantly scanning the fintech space looking for potential partners and acquisition targets.
"We're open for business as it relates to fintech and partnering with other companies," Marshall said.