Bank for International Settlements Releases Fed Study Findings on the Impact of Fintech Lending on Credit Access for U.S. Small Businesses
BY Business Wire | ECONOMIC | 10/04/22 09:00 AM EDTResearch finds that fintech small business lending platforms have the potential to create a more inclusive financial system
DENVER--(BUSINESS WIRE)--
The Bank for International Settlements (BIS) and the Federal Reserve Bank of Philadelphia recently released research that analyzed proprietary loan-level data from Funding Circle
The study found that, when compared to traditional banks, fintech SBL platforms lent more frequently in zip codes with higher unemployment rates and higher business bankruptcy filings. Utilizing internal credit scores also allowed Funding Circle
During the pandemic, banks prioritized processing existing business customers? PPP loan applications, leaving smaller businesses at risk of bankruptcy. Fintech SBL platforms stepped up to fill this credit gap by following a peer-to-peer lending strategy and by partnering with community banks to reach new customers. Those partnerships allowed smaller banks to come together to originate a larger share of PPP loans, expediting loans to small businesses that did not have existing relationships with banks at the onset of the pandemic.
?Small businesses continue to face post-Covid challenges, economic uncertainty and inadequate access to credit,? said Angus Sanders, Chief Revenue Officer and Vice President of Product at Funding Circle US. ?The results of this study reinforce how critical fintech small business lending platforms are to the current and future health of our country?s small businesses. Funding Circle
Results from the study also found that internal credit scores used by fintech SBL platforms, and more specifically the risk ratings assigned to loans by Funding Circle
In aggregate, the findings from this study emphasize the integral role that fintech SBL platforms play in supporting small businesses and creating a more inclusive financial environment. Today, the role of fintech SBL lenders is more important than ever as small businesses seek support in navigating inflation, rising interest rates and volatile markets.
As the report notes, ?we have demonstrated the potential of what the fintech platforms and their use of alternative data could do to move us toward a more inclusive financial system. As collaboration and partnerships grow among traditional banks and fintech firms, they would become more efficient in utilizing borrowers? data using today?s technology and likely to work together in enhancing financial inclusion and the overall economic performance."
For more information, and to learn more about Funding Circle?s solutions, visit www.fundingcircle.com/us.
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Source: Funding Circle