Kabbage is licensing its digital lending technology to one of Canada's largest banks, which plans to offer an online application process to small businesses.

Under the agreement, announced Wednesday, Scotiabank will establish the underwriting criteria for the loans, which will go to small businesses in Canada and Mexico.

Scotiabank will keep the majority of the loans on its own balance sheet, while Atlanta-based Kabbage has the option to buy a minority of them, according to Kabbage Chief Executive Rob Frohwein. The loans will be co-branded by the two companies.

Kabbage, founded in 2009, focused initially on making its own small-business loans. But today the firm, like rival OnDeck Capital, also licenses its technology to banks.

The Scotiabank deal is similar to Kabbage's recently announced partnerships with ING and Santander, according to Frohwein. In all three instances, Kabbage is licensing technology to multinational banks that want to digitize the small-business lending process.

Scotiabank said that Kabbage's technology will allow the bank provide a fully automated application process, as well as fully automated underwriting, servicing and monitoring of loans.

"Scotiabank is transforming the banking landscape by embracing technologies that drive new and improved experiences for its customers worldwide," James O'Sullivan, the firm's group head of Canadian banking, said in a press release.

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