fintech

Fintech lending may increase consumers’ financial vulnerability

Contradictory to the prevailing theory that fintech companies — utilizing cutting-edge algorithms and incorporating data beyond the standard credit reports — have better insights into borrower risk profiles than traditional lenders, new research indicates that fintech borrowers are more likely to default on their loans than their counterparts who utilize traditional banks. In their forthcoming article in The Review of Financial Studies, Marco Di Maggio and Vincent Yao find that fintech companies are actually more reliant on “hard information” than traditional banks and typically acquire market share by first lending to higher-risk borrowers and then to safer borrowers. Although their analysis is based entirely on the personal loans market, the research raises another flag, adding to a growing list of fintech issues ripe for regulation.

Recent Research: Fintech increases financial inclusion and reduces discrimination, yet regulatory challenges lurk

A review of recent reports finds the rise of financial technology (fintech) has the potential to improve the financial health and literacy of the traditionally underbanked and decrease discriminatory practices as more people gain access to services and are included in financial markets. However, regulators face new challenges as a result of fintech.

Fintech lenders boost growth in unsecured loans

More borrowers are utilizing the rapidly growing fintech lending industry to garner record numbers of unsecured personal loans.  American have “sharply increased their use of unsecured personal loans because of the growing presence of fintech lenders,” according to a new report from the Federal Reserve Bank of St. Louis.

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