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Streetwise CIBC strikes deal with small-business lender Thinking Capital

The large CIBC sign outside the bank's office building at the south east corner of King St. West and Bay St.

Fred Lum/The Globe and Mail

Canadian Imperial Bank of Commerce has announced an exclusive partnership with small-business lender Thinking Capital Inc., showing that established banks can form relationships with companies that are often labelled as disruptive forces.

The Montreal-based company provides short-term online loans ranging from $5,000 to $300,000 to small businesses that might not be tapping the banks for loans or want faster service.

"We finance the unanticipated," said Jeff Mitelman, Thinking Capital's chief executive officer. "Expenses and opportunities come to small-business owners very quickly and they have to react very quickly."

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According to the company, applications can be done online in less than 10 minutes – lightning fast next to the days-long process typical of larger lenders – giving it the self-service advantages often associated with financial technology, or fintech, firms. The number of loans has been rising by 50 per cent each year.

While its growth and quick turnaround has made Thinking Capital an example of how the fintech industry can pose a competitive threat to the banks, CIBC is demonstrating that potential competitors can become allies.

The partnership gives Thinking Capital, which launched in 2006, the respected brand name of a big bank that will resonate in a sector where credibility goes a long way (the online lender will continue to finance loans itself); CIBC gets the opportunity to pitch additional financial services to these small-business owners, who typically have annual sales of less than $5-million, and win new clients.

"If they are not CIBC clients today, they will be given an introduction to CIBC," said Jon Hountalas, the bank's executive vice-president of business and corporate banking. "We'd like to meet these people and broaden the relationship with them, beyond just the loan that is being generated."

That could mean additional loans, payroll services or bank accounts.

CIBC is by no means the only bank to establish ties to the fintech industry. For example, Royal Bank of Canada has worked with Austin-based SimplyTapp to develop its mobile payments service and is currently collaborating with a Silicon Valley startup called Manifold Technology.

Nonetheless, a recent report from the University of Toronto's Munk School of Global Affairs, commissioned by the Toronto Financial Services Alliance (TFSA), criticized the big banks for being slow in striking partnerships with fintech firms.

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"It is highlighting that, for financial services companies, fintech is both the biggest threat and potentially the biggest solution to many of their challenges, if we get the partnership right," Janet Ecker, TFSA's president and chief executive officer, said earlier this month.

Mr. Hountalas said that CIBC's decision to strike a partnership with a fintech rival, rather than build its own online small-business lender, comes from a belief that an association can deliver more value than would a startup of its own, even if that means some existing CIBC clients move to the online lender.

"We think we're getting access to a part of the market that, historically, would have been hard to get to – not impossible, but Thinking Capital gets to it better," Mr. Hountalas said.

As for partnering with a big bank rather than aspiring to disrupt the industry with his fintech peers, Mr. Mitelman said that the goal of eating the banks' lunch is more of a U.S. approach.

"You learn very quickly that you are much better off figuring out how to work in concert with the banks rather than oppose them," he said. "The banks have done a tremendous job of establishing brand and creating loyalty, and that is not something we pretend to compete with."

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