Caution Among Banks Has Made Loans Scarce for Fintechs

While recent news has suggested that this summer’s market tribulations might not be the end of the world for fintechs, and runaway inflation has been halted for the moment, it’s still tougher than ever for fintechs dealing in money lending to attract the confidence of investors. With banks requiring deposits for loans and interest rates still increasing, many fintechs are struggling to find investors for the long haul.

As personal lending company Upstart Holdings’ Chief Financial Officer Sanjay Datta put it in an interview, “We’re in a bit of a paradigm shift now, going from using what historically would have been purely at-will capital to finding more permanent-style, long-term capital partners.”

Difficulty finding such partners has spread across the industry, to the dismay of fintech leaders hoping for a quick exit from this downturn. Tom Casey, Finance Chief of Lending Club, put the dilemma bluntly in his discussion of the company’s acquisition of Radius Bank: “If you don’t have the ability to fund your own loans, you’re going to be dependent upon the capital markets and disparate funding. That always becomes challenging for you to predict the price you can sell your loans.”