When the data for Paycheck Protection Program, or PPP, lending finally came out last week, there was plenty to gawk at: there were public companies, pro sports teams, the Ayn Rand Institute—and a slew of errors.
What caught my eye, however, was the list of the top 15 PPP lenders. There are, of course, the usual suspects—JPMorgan Chase and Bank of America, which each oversee trillions of dollars in assets, are at the top of the list, having made more than $25 billion in PPP loans apiece. But No. 12, punching far above its weight and coming in ahead of Wall Street mainstays like Citizens Bank and BMO Harris, was a little-known New Jersey institution called Cross River Bank.
You may not have heard of Cross River. Until recently, it was known for being the bona fide bank behind financial technology companies that themselves are not technically banks, including cryptocurrency company Coinbase, payment processer Stripe, and consumer financing lender Affirm.
But Cross River, a community bank with only $2.5 billion in assets, made nearly $5.6 billion in PPP loans. That’s up from just $50 million in Small Business Administration-backed loans Cross River did in all of 2019.
To put this into context, Citi, which has more than $2.2 trillion in assets (or nearly 900 times as much money as Cross River), didn’t even make the top 15 lenders. So far, Citi has made about $3.4 billion in PPP loans, the bank disclosed when it reported earnings Tuesday. (A Citi spokesperson says the figure “reflects our smaller size as an SBA lender,” coming in 151st among all Small Business Administration lenders in 2019.)
What’s more, Cross River did all that lending despite giving out smaller loans: Its average loan size was just over $38,000, far less than any of the other banks among the top lenders, most of which averaged loans between $100,000 and $200,000 per business. That means Cross River loaned to more businesses than any other lender but Wells Fargo, Bank of America and JPMorgan—all three of which dwarf Cross River by other metrics. It also means, whereas the big banks prioritized lending to their existing customers which tend to be larger companies, Cross River’s loans went to the mom-and-pop shops and other true small businesses for which the PPP was intended: More than 95% of its borrowers were businesses with 20 employees or fewer.
So how did Cross River, which has only one physical branch, scale up its small business lending so dramatically in such a short time? As it turns out, partnering with fintechs to originate loans may be a more efficient way to serve lots of small businesses than just offering those loans directly under your own banner, particularly in a pandemic. After building a platform to automate PPP loan applications in less than 10 days, Cross River could then partner with more fintechs—now more than 30 in total—to funnel in their customers who wanted the stimulus funds, from non-bank lending companies like BlueVine and Kabbage to payroll software company Gusto.
“PPP demonstrated that fintech is the great equalizer,” Phil Goldfeder, Cross River’s senior vice president of public affairs, and a former elected official in New York, tells Fortune.
With a largely automated application portal, it didn’t matter whether the businesses were existing customers or how large or small they were; Cross River opened its virtual doors to any prospective PPP borrower—and it’s still accepting loan applications today, as the PPP deadline has been extended.
Cross River’s example may be a bellwether of what the future of finance and lending looks like. Rather than relying on regional branch networks and a bank’s own size, digital players can acquire customers nationally through slick technology and partnerships. (See also Rocket Mortgage, another digitally-focused offering whose parent company just filed for an IPO.)
And even though it seems that the rise of online banking has made brick-and-mortar branches less important, don’t underestimate traditional banks’ ongoing reliance on them. Even the Citi spokesperson, explaining why its PPP lending was relatively minor, told Fortune it was “because we have fewer than 700 branches nationwide and small businesses are typically served through branches.”
The Cross River and fintech model throws that out the virtual window. “It’s a totally different model in terms of how financial services scale,” says John Pitts, head of policy for Plaid, which connects banks including Cross River and others with many major fintech companies to power the data exchange between them. “Some of those community banks are going to be able to really expand their market size and market power, because they’re not going to be tethered to geography.”