U.S. financial technology companies are tightening their lending standards, a move that has bolstered their access to debt financing from Wall Street investors, according to industry executives.During the COVID-19 pandemic, many fintechs began lending to borrowers with imperfect credit, but Wall Street in
U.S. financial technology companies are tightening their lending standards, a move that has bolstered their access to debt financing from Wall Street investors, according to industry executives.
As the end of pandemic stimulus and rising inflation led delinquency rates to normalize, investors shunned the fintech ABS market late last year. "The outcome of that is that the collateral that's forming the basis of these ABS deals looks very different and is much more conservative now," Datta added.
To be sure, that is a slow pace compared to the $9.6 billion issued in the first half of 2022, and fintech issuers are offering higher yields to compensate for loan loss risk. The average yield for the highest quality AAA-rated tranches of unsecured consumer loan ABS issued so far this year is 6.24 per cent, compared with 3.78 per cent this time last year, according to Finsight.
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