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NEW YORK (Reuters) - The American Bankers Association, a trade group for U.S. banks, has endorsed Chicago-based startup Akouba as a technology provider to enable its members offer small business lending online.
Reuters had reported in January that the ABA was running a formal bidding process to secure an online lending partner, as a growing number of banks launch digital lending services or partner with startups in the sector.
Akouba, which provides a loan origination and underwriting platform that integrates with a bank's own credit policies, was chosen because of a number of factors, including its ability to assess and manage risk, the ABA said on Monday.
It is part of a growing cohort of young tech-savvy companies that automate much of the lending process, making it faster and cheaper than traditional brick-and-mortar operations.
While the online lending sector was initially largely left to the new entrants, such LendingClub Corp, Prosper Marketplace and On Deck Capital, big banks have started fighting back.
For instance, Banco Santander partnered with Kabbage last year to offer small business loans, while JPMorgan Chase & Co sealed a partnership with marketplace lender On Deck Capital Inc in 2015. Goldman Sachs Group Inc launched its own online consumer lending service this year.
Smaller banks have instead relied on ABA, which represents institutions with less than $250 million, to source vendors for technology and other services. Member banks typically receive discounted pricing from partner vendors.
"The small business loan application process is very time-sensitive and costly for banks, and there is a need to simplify and accelerate the process," Bryan Luke, chairman of ABA's Endorsed Solutions Banker Advisory Council, said in a statement.
Partnerships allow fintech startups to tap into a larger network of customers, while allowing banks to improve digital offerings quickly without having to bear costs of developing new services.
Reporting by Anna Irrera; Editing by Sandra Maler