OnDeck Capital Inc. - ODX to help crystallize value in SaaS and analytics
/OnDeck has announced the launch of ODX, a new company that will help client banks develop on-line small business lending operation. The statement says ODX will be a wholly-owned subsidiary of OnDeck.
Preliminary comments
The company reiterated its objective to establish a bank, which the management labeled “second OnDeck-as-a-Service bank.” in its most recent investor presentation. The launch itself is not a surprise. We see the new company as a natural extension of OnDeck's partnership efforts with banks which began three years ago. ODX indeed appears to complement OnDeck's existing platform services business to meet growing demand from banks looking to grow their small business lending capabilities online. The new company is likely to target and engage with those banks with relatively limited resources allocated to online banking.
What is ODX
We understand ODX will offer simplified processes for originations to those banks partnering with OnDeck.
OnDeck believes banks using ODX resources will enable their small enterprise clients to apply for financing from their banks digitally, receive quick decisions, and complete funding in as fast as 24 hours.
In terms of technology, ODX will offer a combination of software, analytic insights, and professional services to help participating banks grow their small business lending process.
The ODX solution is a modular and scalable SaaS platform that enables banks to either create a fully end-to-end digital experience for their customers or to select and purchase parts for specific product functions. In an ideal case, banks deploying the ODX platform will focus on their business targets and outcomes reducing processing costs.
The CEO’s statement
"OnDeck is a pioneer of online lending to small businesses, and ODX will leverage that proven expertise by collaborating with banks to provide their small business borrowers with fast and reliable financing online," said Noah Breslow, chairman and chief executive officer, OnDeck. "ODX is the next generation service provider for the digital lending era, delivering a bank-ready origination platform, analytic support, and implementation services that speed product and process transformation to help banks better meet the evolving needs of their customers."
ODX management
OnDeck has announced the appointment of Brian Geary to serve as ODX president. Mr. Geary previously served as vice president of OnDeck's bank partnership unit where he helped build the company's digital bank originations platform and oversaw its platform collaboration with JP Morgan Chase.
Also hired is Raj Kolluri to serve as ODX head of Product and Technology. Mr. Kolluri joins ODX from SS&C Primatics, where he served as vice president of Product & Engineering and contributed to the building of that company's SaaS analytics platform for banks.
Valuation comment
It is too early to judge any business potential or prospects for earnings enhancements before the company provides further guidance. The management is likely to expand this announcement and, possibly, share more specifics with a business plan. ODX should help OnDeck crystallize value in its SaaS business and credit analytics by potentially attracting strategic interest in equity.
About OnDeck Capital Inc.
On Deck Capital Inc. is one of the leading on line financial intermediaries with specific focus on lending small enterprises. The company has a total of over $7 billion in originations serving over 70,000 clients as at 2017 year-end. The model is scalable as the penetration in on-line small business lending remains low. The management believes there is $80-120 billion in unmet demand for small business lines of credit. Based on that size, On Deck serves less than 9% of the market. They currently operate in the U.S., Canada and Australia. The company has developed proprietary analytics and credit scoring models, key to the sustainability of business model.