Big banks are joining forces with the firms that were supposed to be disrupting them

America’s biggest banks are backing online lenders.

Wall Street institutions like Citigroup, JPMorgan and Barclays are partnering with startups that, in many cases, set out to disrupt the banks they are now colloborating with.

Student loan refinancing specialist CommonBond on Tuesday announced the closing of a $275 million warehouse line of funding from Macquarie Capital, Barclays and other investors.

“You’ll start to see more and more banks partner” with startups, CommonBond CEO David Klein told Business Insider.

He considered working with “a number of banks on Wall Street” but ultimately settled on Macquarie Capital and Barclays — for now. CommonBond will expand into new lines of business like personal loans, according to Klein, who said the firm may even expand into mortgages in the future.

Evolving from hedge funds to big banks

The tie up between Macquarie and Barclays and CommonBonds marks the latest example of an establishment firm partnering with a online lending startup.

In 2015, Lending Club and Citigroup teamed up in a $150 million venture that is ongoing. And JPMorgan teamed up with online business lender On Deck Capital late in the year.

These arrangements help big banks that want to lend, and startups that want to make credit available to their users.

Whereas previously it was hedge funds and individual investors putting money to work through these platforms, now it is the big banks that the startups had been competing with.

“It’s evolved from a smaller pool of capital [hedge funds] to a group of Wall Street banks,” said Suk Shah, CFO at online lender Avant. “We have a consortium of banks” working with Avant.

This includes big banks like Credit Suisse and JPMorgan, and also smaller players like Jefferies, Shah said.

Mike Cagney, CEO of online lender SoFi, told Business Insider late last year he is happy to partner up with Wall Street banks.

“We have a lot of bank participation,” he told Business Insider. “[I]t’s good for the banks, because they need the assets, and it’s good for us, because we need the funding, and it’s a very symbiotic relationship.”

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