More Banks Entering Fintech Space
May 11, 2022
Long a partner of financial technology companies, Cross River Bank in Fort Lee, New Jersey, is now set on buying them.
CRB Group, the bank’s holding company, said Wednesday it had acquired an online lending marketplace data provider backed by the former CEOs of Morgan Stanley, Citigroup and other Wall Street titans. The seller is Synthetic P2P Holdings Corp., which does business as PeerIQ. It will function as an affiliate of Cross River, which has $13.5 billion of assets.
This is CRB’s second purchase of a fintech company after its 2019 acquisition of small-business banking company Seed. More such deals are likely to follow, said Phil Goldfeder, senior vice president of global public affairs at Cross River. “We are always looking for additional companies that can broaden our reach and help us better service our partners,”he said in an interview. “I would say more to come.”
The bank and the fintech have partnered since 2018, combining Cross River’s capital, technology, and regulatory compliance processes with PeerlQ’s risk management platform, loan and borrower data sets, and data-verification tools.
“Cross River is constantly adapting to the evolving landscape of financial services with an insatiable thirst to innovate,” said Gilles Gade, the bank’s CEO.
Cross River was founded in 2008 with the intent of becoming a tech-savvy bank. It has since partnered with dozens of fintechs. Cross River originates, packages and sells loans; it partners with fintechs to service them.
Cross River and PeerlQ helped community banks and other loan buyers tap into the digital lending sector. They will continue to do that but under the same ownership. The deal is part of an ongoing effort at the bank to expand offerings, said Gilles Gade, the founder, president and CEO of Cross River. “Cross River is constantly adapting to the evolving landscape of financial services with an insatiable thirst to innovate,” Gade said in a prepared statement.
The two companies did not disclose financial terms of the deal, which has closed. The privately held PeerlQ declined to provide its annual revenue or other financial performance data. But the New York company’s founder, Ram Ahluwalia, said in an interview that PeerlQ could accelerate growth by capitalizing on shared resources with Cross River. “We can do more together than as a partner that is one step removed,” he said. Ahluwalia and the firm’s roughly dozen employees have joined the combined company.
Ahluwalia described PeerlQ as “the Bloomberg for marketplace lending.” The firm’s data and analytics tools are used by loan buyers to assess risk and develop informed points of view about given loans’ likely performance and value, he said. Its tools, for example, help buyers to assess the value of a loan if interest rates rise or fall or its likely durability in stressed scenarios.
PeerlQ attracted fanfare when it was founded in 2014 because its early and prominent investors included former Morgan Stanley CEO John Mack, former Citi CEO Vikram Pandit and Bloomberg CEO Dan Doctoroff, among several others from major financial firms. Additionally, last week, Cross River formed a venture capital arm to invest in startups. Cross River Digital Ventures will fund and advise early-stage companies that focus on lending, payments, investing and fintech.
Cross River has newfound heft after rising to prominence in 2020 and early 2021 as the most active Paycheck Protection Program lender among community banks. It drew on its myriad fintech alliances to develop simple and quick ways to field and process PPP loans. Last year, it ranked behind only Bank of America and JPMorgan Chase in PPP loans made. Working with several partners, including Intuit and Kabbage (a unit of American Express), Cross River reached well beyond its pre-pandemic customer base to serve borrowers that bigger banks overlooked, executives said. It started 2020 with about $2.5 billion of assets but swelled to an $11.8 billion-asset bank by the close of the third quarter last year. It exceeded $13 billion of assets by the close of the first quarter this year.
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