40% of Millennials can improve access to credit with FinTech solutions
With concerns over the banking system dominating the news following the collapse of Silicon Valley Bank and others, it can be easy to lose sight of another corollary issue: financial access. Although the challenge of financial inclusion is most acute in developing countries, it remains a problem in America as well – primarily in terms of access to credit.
A national survey by the Federal Reserve Bank of New York showed that amid fears of continued price increases, consumers’ perception of access to credit is deteriorating. Consumers see diminishing prospects for getting credit, and they say it is much or somewhat harder to access than it was a year ago, rising to 58%. The problem is common among young consumers, with 48% of Generation Z and 57% of millennials reporting credit score-related problems obtaining financial products.
«FinTech Tracker®” examines the problem of consumers’ declining access to traditional credit and how FinTechs are helping by providing consumers with alternative lending options and ways to improve credit scores.
Around the FinTech Space
A study by the Consumer Financial Protection Bureau (CFPB) indicated that financially distressed consumers are saving through buy now pay later (BNPL) services. If BNPL borrowers pay on time, they pay zero interest. In contrast, the CFPB estimated that most BNPL borrowers would have faced interest rates between 19% and 23% using credit cards.
In a Federal Reserve survey of bank lending practices, a significant proportion of financial institutions (FIs) reported tightening lending standards for credit card loans. Many financial institutions, the Fed found, reported increasing minimum credit score requirements, reducing credit limits and limiting the number of loans made to consumers below credit score limits.
For more on these and other stories, visit the Tracker’s News and Trends section.
An industry insider on how secured cards can boost credit profiles
The problem of credit access can be a vicious cycle, as consumers who lack the profiles to qualify may never have the opportunity to build them. Secured cards’ built-in spending limits can help consumers build a better financial foundation while earning issuers credit interchange fees.
To get the Insider POV, we spoke with Roy Ng, co-founder and CEO of Bond, to learn more about how secured credit cards can benefit both consumers and FinTechs.
FinTechs have an opportunity to improve consumers’ creditworthiness
With millions of Americans still struggling to access traditional credit options, achieving full financial inclusion will be neither quick nor easy. With an estimated 307 million smartphone users in the US, however, the rise of mobile technology has created opportunities to expand credit access to underserved households.
FinTechs increase credit availability through cheaper and accessible lending options, such as BNPL, helping those who would otherwise resort to payday loans and other expensive types of lending. FinTechs also empower consumers to improve their credit profiles and thereby expand the types of services they can qualify for.
To learn more about how FinTechs are addressing the problem of consumer credit access, read Tracker’s PYMNTS Intelligence.
About Tracker
«FinTech Tracker®“, a collaboration with Sezzleexamines the problem of consumers’ declining access to traditional credit and how FinTechs are helping by providing consumers with alternative lending options and ways to improve credit scores.
