With a slew of earnings reports in the rearview mirror, and on the horizon, whether from big banks, the payment networks or the digital upstarts, a few common themes and conversations dominate.
Among them: The state of the consumer, and by extension the lending landscape.
Individuals, of course, have been spending right through the inflation that has been a hallmark of 2022. Many of the banks, as we’ve been surveying, have made provisions for loan losses on their books.
Most notable has been JPMorgan, which established a $902 million reserve. Bank of America took a much smaller reserve in the quarter, $30 million. LendingClub said last month that it has exceeded 4 million members.
We’ll know a lot more about whether the practice of taking reserves will be anecdotal or a larger trend in the coming weeks as the Visas and the Mastercards and the LendingClubs of the world post their own results and commentary.
But as i2c President Jim McCarthy told PYMNTS as part of his own recent observations on the shape of things to come: “For the FinTech community, writ large, it’s going to be interesting to see how they manage these big changes in the macroeconomic climate,” he said. Companies entrenched in the buy now, pay later (BNPL) space may offer a sense of how macro pressures not seen in decades may impact consumers and the FinTechs serving them.
For our part, the latest provider rankings for personal lending apps help show the growing popularity of the online lending models themselves.
Read also: Personal Loan App Provider Ranking Sees Competitors Hold Their Positions
Some scattered stats show the widening embrace, as for example, SoFi added 523,000 members in its fourth quarter.
Artificial intelligence (AI) lending platform Upstart Holdings posted fourth-quarter results earlier this year that showed triple digit revenue gains.
Read also: AI Lending Platform Upstart Beats Earnings Estimates, Sees Shares Surge
You get the picture. But earnings results are rear-view mirror snapshots. If one takes the performance of the FinTech IPO Index as a barometer, the outlook, or at least the expectations (by investors) is less than sanguine about what lies ahead. As of last week that index, which contains firms like Open Lending and MoneyLion, is down roughly 27% in 2022 alone.
Read more: FinTech IPO Index Braces for Further Turbulence as Q1 Earnings Season Kicks Off
Global Phenomenon, Too
And of course the online lending phenomenon is not limited to the US. Paytm has also been posting triple-digit growth in its lending business. The $1.9 million in loan disbursements in January, with year-on-year (YoY) growth of 331%.
We’ll get a sense of just how well (or perhaps less well) high tech, AI and machine-driven models will prove in FinTech lending in these uncharted macro waters.
But even how, and what, technology to extend loans across digital channels might change.
Last month the U.S. Department of Commerce’s National Institute of Standards and Technology (NIST) issued a draft of its “AI Risk Management Framework” — and the commentary period closes at the end of this month.
Per the NIST’s draft commentary: “AI risks and impacts that are not well-defined or adequately understood are difficult to measure quantitatively or qualitatively. The presence of third-party data or systems may also complicate risk measurement. Those attempting to measure the adverse impact on a population may not be aware that certain demographics may experience harm differently than others.”
Where we go from here? At the moment, it’s unclear.
Read more: Commerce Department’s NIST Unit Seeks Comment on Draft AI Rules for Finance Sector
We’re always on the lookout for opportunities to partner with innovators and disruptors.
Learn More