Fundation Pulls Community Bank Into FinTech Collaboration

Large financial institutions (FIs) are increasingly turning to FinTech firms and alternative lenders to augment their small business (SMB) offerings, but community banks are beginning to get on board with the partnership strategy, too.

The latest to do so is Provident Financial, a New Jersey-based bank providing consumer and business banking services in New Jersey and Pennsylvania. Reports in American Banker on Tuesday (July 2) said the bank is collaborating with alternative small business lending company Fundation to strengthen its SMB lending position.

“We wanted to offer something for our customers that was convenient,” said Provident Executive Vice President and Director of Retail Banking Josephine Moran, adding that the bank aims “to offer options to customers” by integrating Fundation into its small business finance solutions.

According to the publication, the partnership is not only noteworthy for the FI’s work with a FinTech. Their collaboration will see Provident, described by American Banker as an institution “known for its conservatism,” offer unsecured loans. Small businesses can apply within bank branches and online for loans of up to $250,000, reports said.

Mark Fitzgibbon, principal and director of research at Sandler O’Neill, told the publication that Provident is known as “the turtle bank,” for being a slow-and-steady financial services provider that can produce “good results in good environments and bad environments.”

“They’re very disciplined on credit and interest rate risk,” he said.

The bank’s work with Fundation will expand its small business lending operations, but limit its own exposure to small business lending risk because the loans will be largely held by Fundation.

Reports said the majority of Provident’s loan book is made up of commercial mortgages and multifamily credits. Working with an alternative lender will enable the bank to diversify its offering, and strengthen its position with small businesses without amplifying risk exposure. The publication pointed to other financial service providers like Nav that may be able to repeat this strategy.