Citi seeks to pair banks and small businesses

Dive Brief:

Citigroup on Wednesday launched a new service called Bridge built by Citi to connect small and midsize businesses with a host of banks, primarily made up of minority depository institutions.
The platform will link banking institutions across the country with businesses based in Alabama, Colorado, Georgia, Louisiana, North Carolina, South Carolina and Tennessee that are searching for loans.
Citi Senior Vice President Harte Thompson said the platform will combat racial inequality in the world of banking by allowing minority deposit institutions "to provide a digital experience without having to build it out internally," and enabling borrowers "that are looking to bank with minority depository institutions" to find such backers.

Dive Insight:

Citigroup launched the pilot phase of a new lending platform Wednesday. Bridge connects small- to medium-sized businesses with 18 different banking institutions, most of which are minority-owned banks or community development financial institutions. Businesses being targeted by the new program, mainly based in southern states, can use the service to solicit loans under $10 million.

Citi describes the platform as a "digital meeting place," and highlights liquidity creation, the digitization of loan processes and racial justice initiatives as some of the platform’s guiding aspirations.

To use the service, businesses first complete a request for proposal, which includes financial data and the value of the loan they hope to obtain. Banking institutions respond with nonbinding offers, and businesses are free to select their best option before pursuing the relationship outside of the platform.

"We wanted to make sure that we give borrowers choice, and so we picked a few banks of different sizes," Citi Senior Vice President Rohit Mathur said.

The new platform squares with Citi’s broader efforts to diminish the racial wealth gap. In September, Citi launched the Action for Racial Equity, and spent $1 billion on racial justice initiatives, including "over $50 million in new capital and revenue-generating opportunities allocated for Minority Depository Institutions."

According to American Banker, the utility of the platform is threefold: to bring capital to small companies, to build up Citi’s ties with minority-owned banks and to promote innovation in general.

One of the institutions taking part in the pilot is Columbia, South Carolina-based Optus Bank, a minority depository institution.

"Bridge built by Citi will enable us to deploy the capital we’ve raised from Citi and others back to more entrepreneurs – jumpstarting the desperately needed revitalization after this pandemic ravaged many neighborhoods, particularly those in underbanked communities," Optus Bank CEO Dominik Mjartan said in a statement.

Bridge built by Citi is a product of Citigroup’s D10X incubation program. D10X has given rise to other platforms like Ensemble, which aims to help divorced and separated parents manage their finances.

For now, there are no fees associated with the new Bridge product for either lenders or borrowers. And according to Mathur, there is no predetermined model for fees. Citigroup is collecting data about the interactions between lenders and borrowers on the platform, and has no specific date for the pilot's conclusion.