Evidence of collaboration between alternative finance providers and banks continues to pile up. Last week Seedrs, the UK’s second-largest equity crowdfunding platform, announced a tie-up with the Belgian arm of the Dutch bank ING. This will see companies judged unsuitable for pure bank funding redirected to Seedrs to raise equity and/or to a French rewards-based platform rejoicing in the name KissKissBankBank.

 

This sort of referral tie-up makes a lot of sense given that early-stage companies need equity finance as opposed to debt in most cases and that there’s no competition between a bank and an equity crowdfunding platform – they do different and, more importantly, highly complementary things. A company that is better capitalised, having raised equity, is on the road to becoming much more bankable so in that sense this sort of deal fits the “life-stage” template of collaboration between banks and alternative finance providers that I’ve referred to before.

 

Gaining direct access to Seedrs and KKBB, says ING Belgium, “will enable entrepreneurs to diversify their funding sources and also to test their projects with a broad audience.” Companies that are referred need only a “couple of clicks” to get access to the online platforms and can expect to hear within a couple of days if they’re suitable for crowdfunding. This initiative could bring additional deal flow to the crowdfunders but it certainly has immediate PR value for both sides: the platforms gain credibility while ING can stress the importance of building better banking relationships with  customers.  “Our aim is to strengthen our customer’s project and to support them in the growth of their business,” says ING Belgium. “Our role is therefore much larger than that of your classic lender: we are a collaborative partner and advisor.”

 

ING also figured in another interesting deal last week, this time as part of an investment consortium also including Santander’s venture fund and Scotiabank that took part in a $135m funding round for Kabbage, a US online lender that originally funded merchants selling through online markets such as eBay and Amazon.

 

The collaboration here was rather different, this being an online lending business and so much more directly competitive with bank funding. The key interest among the banks that spoke to the FT was Kabbage’s online lending technology, as CEO Rob Frohwein acknowledged:  “They’re lacking an elegant technical solution for consumer and small business lending.”

 

Mariano Belinky, MD of Santander’s InnoVentures fund, said Kabbage’s technology could help the bank “serve those clients we are unable to serve with our typical channels”. The idea ultimately is to “white-label” Kabbage’s technology use it to help develop Santander’s online proposition. However, like most in his industry, Belinky remains cautious. “No one wants to be caught testing one of these things in a down cycle,” he observed.  

 

For its part, ING said: “The big differentiator of this platform is that it substantially increases the speed of the loan application process and the loan approval process.” This gets to the heart of the matter and is the rationale that underlies a lot of other conversations that are going on between banks and platforms – banks can clearly see the attraction of using technology to address certain parts of the market and are now want to start experimenting with the platforms that others have built rather than starting from scratch themselves. This is wise, given the vast bureaucracy involved in most things large banks try to do, and it also offers some valuable potential benefits to the platform not least of which is another possible way to realise value from the venture.

 

It’s not too difficult to imagine that some of the alternative platforms that sprung up to displace the incumbent banks could ultimately turn into their technology suppliers.