Technology is a big part of the reason why the numbers aren’t in banks’ favor. Banks invest millions in software and hardware every year, but the vast majority of their spending is for compliance purposes, not lending. When they do come up with innovative lending technology, they must graft it onto legacy systems that were never designed to be agile. Alternative finance has the technology banks need. These financial technology upstarts have developed innovative ways of combing data to almost instantly find the elements that will distinguish a good credit score from a poor one.

It is for this reason that the relationship between alternative finance and banks -- large and small banks, urban and regional -- is evolving from adversaries to partners. Each side has strengths the other needs.

Partnering with an alternative finance company can allow a bank to offer product sets not currently in its wheelhouse. A bank might be comfortable with medium-term loans, but not with equipment finance. It may have worked hard to be an approved lender with the U.S. Small Business Administration (SBA), but it doesn’t have the expertise to fund franchises. The leading alternative finance companies are, increasingly, bringing a multitude of choices under one roof and on one web-based platform.

Partnering can also give the banks access to innovative lending technology that can easily integrate with their existing systems. Alternative finance companies have been working on technology which will allow banks to take advantage of their services in ways that will almost be invisible to their clients. Rather than spending time on a loan application it is likely to decline, a bank can work through an alternative finance company’s application program interface (API) to direct that customer to a source that can approve it. The API and white-label technology being pioneered by alternative finance companies will spare banks from the costly and cumbersome process of trying to integrate new software into their legacy systems.

In fact, I think the whole partnering process will be much less disruptive to bank operations than many people assume right now. Consider underwriting: Bankers are accustomed to doing face-to-face interviews with their lending prospects. They weigh the numbers on the application form against the story that the would-be customer tells. When traditional bankers hear that some alternative finance companies are doing underwriting solely on the basis of data and the equations that they construct around that data, they get nervous. I get it.

However bankers now are learning that not every alternative finance company operates that way. Some, like mine, combine data-powered analysis with telephone interviews by a trained underwriting team. This staff can ask small business owners about the blips and gaps in their credit histories. They can hear that finances were strained by natural disasters or family tragedies and listen to what the business owner is doing to build a better business, just like a traditional banker would do.

Partnerships between banks and alternative finance companies are no longer some distant point of contemplation on the horizon. They are happening. Western Independent Bankers, a trade group for community banks in 13 western states from Alaska to Wyoming, recently selected Bizfi to be its Premier Solution Provide for alternative finance. As Amy Feldman noted in Forbes last winter, it might force us all to rethink what we call this evolution in finance:

“It’s not really alternative lending anymore,” she wrote, “when JPMorgan Chase, the biggest bank in the country and OnDeck Capital, a major marketplace lender, team up on small business lending.”