Which Lenders Are More Likely to Reach Out to Underserved Consumers: Banks versus Fintechs versus Other Nonbanks?

There has been a great deal of interest recently in understanding the potential role of fintech firms in expanding credit access to the underbanked and credit-constrained consumers. We explore the supply side of fintech credit, focusing on unsecured personal loans and mortgage loans. We investigate whether fintech firms are more likely than other lenders to reach out to “underserved consumers,” such as minorities; those with low income, low credit scores, or thin credit histories; or those who have a history of being denied for credit. Using a rich data set of credit offers from Mintel, in conjunction with credit information from TransUnion and other consumer credit data from the FRBNY/Equifax Consumer Credit Panel, we compare similar credit offers that were made by banks, fintech firms, and other nonbank lenders. Fintech firms are more likely than banks to offer mortgage credit to consumers with lower income, lower-credit scores, and those who have been denied credit in the recent past. Fintechs are also more likely than banks to offer personal loans to consumers who had filed for bankruptcy (thus also more likely to receive credit card offers overall) and those who had recently been denied credit. For both personal loans and mortgage loans, fintech firms are more likely than other lenders to reach out and offer credit to nonprime consumers.