FinTech now 38% of the personal loan market
FinTechs, not traditional banks, appear to be the preferred method of getting unsecured personal loans in the United States, as the market hit an all-time high last year.
This is according to TransUnion, which – as CNBC reported – released data on the personal loan market in 2018 on Thursday, February 21. The unsecured personal loan market grew 17% year-on-year last year, reaching $138 billion. Lending momentum has been driven by digital technology companies, the report notes.
“The rapid growth of consumer lending rests entirely on the shoulders of FinTechs,” Jason Laky, senior vice president and head of consumer lending business at TransUnion, said in an interview with CNBC. “They continue to be the main driver.”
According to data from TransUnion, FinTechs originated 38% of all personal loans in the United States last year, up from 35% in 2017. In 2013, FinTechs accounted for just 5% of the unsecured personal loan market. Meanwhile, traditional banks accounted for 28% of personal loans, up from 40% five years ago. The market share of credit unions fell by 21%, compared to 31% during the same period.
Although banks and credit unions saw their market share decline last year, they experienced overall growth in total loan balances. TransUnion has found that consumers are taking out personal loans from FinTechs to consolidate debt, to finance home renovations and for retail purchases. The data also showed that in 2018 FinTechs moved lower on the credit curve in terms of lending criteria, raising concerns about how they would fare if the US economy entered. in an economic downturn. For many FinTech lenders, this would be the first downturn they would face.
“Subprime borrowers are the ones who, if the economy turns and growth slows, are at risk of losing their jobs or their hours; that creates financial stress,” Laky told CNBC. “As long as we believe [the] the economy is still going strong [a] solid growth path, there should be no problem.”