A new research paper released by the Federal Reserve Bank of Philadelphia found that fintech lending has expanded consumers’ ability to access credit.  The paper, “Fintech Lending: Financial Inclusion, Risk Pricing, and Alternative Information,” used account-level data provided by a large fintech lender to “explore the advantages/disadvantages” of loans made by such lender “and similar loans that were originated through traditional banking channels.”

The study’s key findings include:

• The fintech lender’s consumer lending activities penetrated into areas that could benefit from additional credit supply, such as areas that have lost a disproportionate number of bank branches and highly concentrated banking markets.
• Consumers presenting the same credit risk could obtain credit at lower rates through the fintech lender than through traditional credit cards offered by banks.
• The lender’s use of alternative credit data allowed consumers with few or inaccurate credit records (based on FICO scores) to access credit at lower prices, thereby resulting in enhanced financial inclusion.

In February 2017, the CFPB issued a request for information that seeks information about the use of alternative data and modeling techniques in the credit process.