The biggest US bank JPMorgan Chase & Co has teamed up with On Deck Capital Inc to speed up loan process for small business customers. The partnership will combine the lending experience of JPMorgan and On Deck Capital's technology platform to accelerate loan processing time.

JPMorgan will launch a new Chase lending product for small-dollar loans in 2016. 

Generally, small business loan applications take days to weeks in processing. The main objective of partnership with On Deck Capital Inc, a marketplace lender, is to accelerate the process of loans to lender's four million customers from the small business segment.

After the partnership news hit the market, On Deck's stock soared 28 percent. 

In a telephone interview with Bloomberg, Jennifer Piepszak, Head of Business Banking at JPMorgan, explained the purpose of the partnership.

"We're working with On Deck Capital to build a new Chase lending product that will be launching in 2016 for small-dollar loans to our small-business clients."

"By combining Chase's relationships and lending experience with On Deck's technology platform, we'll be able to offer almost real-time approvals and same or next day funding", she added.

Surpassing conventional banking system, alternative lenders are fast catching up with new ways of exploring business. Many technology-driven startups underwrite smaller loans in the range of $100,000-$200,000. The processing time is very quick for small loans.

According to a report by Forbes, On Deck Capital lent over $3 billion to small business segment based on its proprietary algorithms since its inception in 2007. The average rate of On Deck loans is at 40s much higher than traditional bank loans.

However, the easy and quick processing is the key in making success in this small loans business segment. 

On Deck Capital made its IPO in December by issuing shares at $20 each. The overcrowding market of online lending pushed the stock price lower to $9.01. However, after the partnership with JPMorgan news, the stock rose to $11.50 on New York Stock Exchange (NYSE).

On Deck Capital's stock rose over 29 percent on 2 December. JPMorgan would make use of its small business lending platform, according to a filing by On Deck Capital to Securities and Exchange Commission. On Deck said the partnership with JPMorgan Chase would begin operations in 2016. 

With the technology applications influencing banking business dynamics, major financial firms working with online lending startups. Many banks prefer online platforms to offer cheaper loans with faster processing. 

JPMorgan's partnership with On Deck is reportedly part of a broader discussion among banks' executives over whether to collaborate or compete with potentially disruptive technology firms.

Small-dollar credit refers to loans below $250,000. JPMorgan and On Deck Capital will work on identify the loopholes in the existing processing system that consume much time and weed them out. The main purpose is to make loan processing within hours or a day.