Regions Financial Corporation has collaborated with financial technology or “Fintech” startup, Fundation Group LLC, to diversify its lending base. Regions will now be able to offer its lending products to Fundation Group’s online customer base, comprising small businesses.

Regions had been looking for a prospective online partner since last year. Based on sources, the search finally ended with Fundation Group, since the company underwrites its own loans, as opposed to certain others like LendingClub Corporation that simply matches borrowers to lenders.

According to Regions, “20 percent of small business owners in the U.S. are already turning to online lenders to meet their credit needs”. As such, Regions seeks to capitalize on this shift in customer preference. Moreover, the first-of-its-kind deal between a large full service bank and an online business lender will likely translate into an opportunity for Regions to grow loans and hence, revenues, on a steady as well as long-run basis.

Agreement in Detail

The agreement allows customers of Fundation Group to access Fintech’s online loan application form directly through Regions’ website.

Additionally, services of Fundation Group will facilitate quicker filing of loan applications for Regions’ lending products. Notably, at Fundation Group, customers are able to execute loan application in less than 10 minutes, with such loans generally getting funded in 3 days.

Further, Fundation Group will underwrite fixed-rate installment loans up to $1 million, while all other types of loans valued above $1 million will be underwritten by Regions.

Growing Popularity of Fintech Companies

Notably, the distrust upon banks, post the 2008 financial crisis, has likely acted as a positive catalyst for these Fintech companies, which offer similar services on an alternative platform. At the same time, an ever-increasing demand for technology and less stringent regulatory requirements (compared with banks) has given rise to various Fintech start-ups, of late.

These online lenders are attractive to customers, given the increased transparency and enhanced personal experience offered by them. Customers are able to choose suitable products from a wide array of available options.

Driven by such popularity, the global Fintech industries have seen their investments tripling year over year to more than $12 billion in 2014. In fact, 25% of such investments (in terms of total value) have been made in lending-based companies.

What it Means for Regions

Regions has entered into an industry that is set to revolutionize the financial services sector in the future. According to The Goldman Sachs Group, Inc., the Fintech industry is predicted to eat away $4.7 trillion in revenues and $470 billion in profits from traditional Wall Street firms. As such, Regions is poised to benefit from the unique collaboration.

Moreover, access to a large online customer base will help the company further leverage its traditional banking operations. Besides, as mentioned earlier, it will lead to higher loans and improved revenues for the company.