US lender confirms third-party plans

OnDeck entered the Australian SME finance market in April 2015 in its first venture outside North America. A strategic partnership with accounting software giant MYOB was a key customer acquisition channel for the group and continues to play a key role.

Speaking on a panel at the Australian Securitisation Conference in Sydney yesterday, OnDeck Australia CEO Cameron Poolman said the marketplace lender was careful to establish a brand in the local market before entering the third-party channel.

“We made a decision that we needed to build a brand in Australia. We do a lot of radio, direct mail, digital and all the usual online methods of building a brand. We have our strategic partnerships. With MYOB, they refer customers to us that are relevant and we fund them. Shortly we will be launching and working with brokers as well,” Mr Poolman said.

“In Australia we’ve got a growing number of competitors,” he said. “Most of our competitors access customers via brokers, which is understandable because it is quick access to customers and it is a percentage acquisition cost rather than a dollar acquisition cost.”

OnDeck Australia’s largest shareholder is US-based OnDeck, a NYSE-listed alternative business lender that opened its doors in 2007. To date the group has originated US$5 billion in loans to over 50,000 small businesses in the United States.

Mr Poolman says the Australian businesses will be able to leverage considerable data and operational efficiencies from its US-based parent.

“We think that at scale we will be significantly more efficient than our competitors,” he said. “We have 70 full-time data scientists sitting in New York and we will leverage their skills to build our local credit score here so we understand the health of small businesses better than anyone else.”

Consumer awareness around credit scores is still in its infancy in Australia compared to overseas markets. Mr Poolman said that awareness, rather than competition, is OnDeck Australia’s biggest challenge.

“It is interesting to look at small business lending here in Australia. Eighty-five per cent of it is dominated by the big four banks and their subsidiaries. Our biggest challenge is actually not competitors at the moment, it’s lack of awareness,” he said.

“In the US, 80 to 90 per cent of small businesses would understand the value of alternative funders. In the UK it is 44 per cent. In Australia 16 per cent of small businesses understand about alternative lending.”

Mr Poolman pointed to recent research by MYOB that found 93 per cent of Australian SMEs had never checked their credit score. This led OnDeck to develop ‘Know Your Score’, an online tool powered by Veda that allows small businesses to receive their credit score for free.

The move follows a similar initiative launched by SocietyOne through a partnership with Veda.

[Related: CBA director joins OnDeck as operations chief]