Last Week in Lending: Friday, 21 April

Looking to catch up on the latest in lending? Here are some of the stories that stood out to me last week.

The best fintechs turn risk into their IP

Matt Brown ’s article on how the most successful fintechs consider risk as their core IP is one of the best I’ve read. He talks about how Fintechs that have a “dynamic” approach to risk are much better at determining who’s a good customer vs. who’s a bad one and are quick to adjust to market changes. 

This idea of a “dynamic risk posture” is so important in today’s lending environment and is something I spend a lot of time talking about with customers! It allows fintechs to take advantage of potential upside risk while not taking on too much downside risk – and as a result – grow more profitably.

Read the full deep dive on how the best fintechs use risk to their advantage

CFPB proposes reforms to credit card penalty fees in the US

Credit card debt in the US is at record highs. And the CFPB is worried about how this is affecting consumers. To help protect them, the CFPB has proposed rule amendments that would massively reduce the amount credit card providers are allowed to charge their customers for late payments. This means credit card providers would have to compete more on upfront interest rates for generating revenue rather than having a business model built on back-end fees. 

If this change goes through, the need for credit card providers to have highly accurate risk selection will be even more crucial. Being able to price customers in a really personalized way and price competitively often comes down to how accurately you can assess risk. I will be watching this closely!

Read more on how CFPB plans to rein in credit card late fees

New research shows consumers rely on BNPL for more than we thought

BNPL in the US is booming. High inflation has led to more and more consumers relying on installment loans, with almost half of Americans having used a BNPL app. One stat I didn’t expect to see in a recent survey was the large proportion of people (over 20%) that use BNPL for everyday living expenses like groceries. Super interesting to see the growth of new loans originated by the main market players - B2C BNPL is certainly not losing momentum.

Read more about the survey.