It is the latest evidence of financial technology’s impact on traditional banking – not to mention new validation for the impressive Atlanta cluster of fintech startups. That’s two ways to view the recent news that GreenSky, a local provider of a loan-enabling technology platform for banks and retailers, has sealed a deal with Cincinnati-based Fifth Third Bancorp.
Fifth Third is sinking $50 million in investment funds into the startup, raising its valuation to a stratospheric $3.6 billion. As the Wall Street Journal put it, that funding “makes GreenSky one of the most valuable privately held financial technology startups, more than doubling its valuation from a 2014 fundraising.”
The financial institution will use GreenSky’s platform to make what it expects to be $2 billion worth of loans through the 12,000 merchants taking part in the GreenSky program.
Its CEO, David Zalik, said that GreenSky “maintains funding commitments with a number of outstanding banks. This announcement, however, reflects an important expansion to the nature of GreenSky’s historic bank funding arrangements, with the Fifth Third alliance including both the provision of proprietary technology and merchant cross-sale activities. This is a multifaceted alliance that will not only benefit all parties today, but that also will continue to drive customer-centric innovation in the years ahead.”The “number of outstanding banks” Zalik is referring to totals 14 institutions, including Regions Financial and SunTrust. Adding Fifth Third to the mix means introducing GreenSky’s technology to 2.2 million consumer customers of the nation’s 14th-largest bank. Fifth Third’s online services, 1,200 financial centers and its mobile app will soon integrate the startup’s software, and the bank’s own network of merchant clients will also get access to the platform.
“As Fifth Third begins this relationship with GreenSky, we believe that the best outcomes for consumers and business customers are likely to come from this unique bank/fintech collaboration,” Fifth Third Bancorp president/CEO Greg D. Carmichael said in the news release. “This alliance will speed loan decisions for Fifth Third customers and bring new efficiencies and security to GreenSky’s customers.”
GreenSky’s website says the company’s primary markets are the home improvement and retail sectors. “The easy way to offer financing to everyone, anywhere,” says marketing text, referring to merchant partnerships with the likes of Home Depot to provide renovation and project loans that can be approved quickly through online or mobile applications, or with a phone call. Staged funding to merchants promises steady cash flow, and GreenSky says it can offer a wide range of financing plans.
The GreenSky/Fifth Third agreement highlights points made during a May panel discussion titled “The Future of Lending: FinTech Trends and Technology,” sponsored by the MIT Education Forum Atlanta. One of the panelists, Brian Dally, CEO and co-founder of GROUNDFLOOR, a Tech Square-based lender targeting the real estate sector, predicted more marriages of convenience between traditional banks and fintech startups.
“Some of them (banks) are going to partner with the Kabbages of the world, and get smart and integrate that,” Dally said. He was referring to Kabbage, an Atlanta lender to small businesses that also provides data analytics. “Some of them are going to remain ossified and stick their heads in the sand.”
Tom Villante, CEO of Bay Area-based online payment provider YapStone, echoed that sentiment in a late June post on the Let’s Talk Payments website. Villante wrote that traditional banks “will likely benefit from the rise of fintech because most fintech companies and startups will need to partner with the establishment to utilize the existing financial infrastructure and build on their rails to launch new business models and create new revenue streams.”