With a slew of earnings reports in the rearview mirror and on the horizon, whether from big banks, payment networks or digital newcomers, a few common themes and conversations dominate.
Among them: The state of the consumer, and by extension the credit landscape.
Individuals, of course, have been spending throughout the inflation that has characterized 2022. Many banks, as we have studied, have built up provisions for loan losses on their books.
Most notable was JPMorgan, which established a reserve of $902 million. Bank of America took a much smaller reserve in the quarter, $30 million. LendingClub said last month that it had surpassed 4 million members.
We’ll know a lot more about whether the practice of taking reservations will be anecdotal or a broader trend in the coming weeks as the world’s Visas, Mastercards and LendingClubs release their own findings and commentary.
But as i2c President Jim McCarthy told PYMNTS as part of his own recent observations on the shape of things to come: “For the FinTech community, at large, it will be interesting to see how they manage these big shifts in the macroeconomic climate,” he said. Companies rooted in the buy now, pay later (BNPL) space can provide insight into how macroeconomic pressures not seen in decades may impact consumers and the FinTechs that serve them.
For our part, the latest personal loan app provider rankings help show the growing popularity of online loan models themselves.
Read also: Personal Loan App Provider Ranking Sees Competitors Hold Positions
Some scattered stats show the embrace widening, like for example, SoFi added 523,000 members in its fourth quarter.
Artificial intelligence (AI) lending platform Upstart Holdings released fourth-quarter results earlier this year that showed triple-digit revenue gains.
Read also: AI Lending Platform Upstart Surpasses Earnings Estimates, Sees Stock Rise
You get the picture. But earnings results are rear-view mirror snapshots. If we take the performance of the FinTech IPO index as a barometer, the outlook, or at least the expectations (of investors) are less optimistic about what lies ahead. Since last week, this index, which contains companies like Open Lending and MoneyLion, is down around 27% in 2022 alone.
Read more: FinTech IPO index braces for further turmoil as Q1 earnings season kicks off
Global phenomenon, too
And of course, the phenomenon of online loans is not limited to the United States. Paytm also saw triple-digit growth in its lending business. The $1.9 million in loan disbursements in January, with year-on-year (YoY) growth of 331%.
We’ll get a sense of how good (or maybe not so good) high tech, AI, and machine-driven models are in FinTech lending in these uncharted macro waters.
But even how and what technology to extend lending across digital channels could change.
Last month, the U.S. Department of Commerce’s National Institute of Standards and Technology (NIST) released a draft of its “AI Risk Management Framework” — and the comment period ends at end of this month.
According to NIST’s draft commentary: “AI risks and impacts that are not well defined or properly understood are difficult to measure quantitatively or qualitatively. The presence of third-party data or systems can also complicate risk measurement. Those trying to measure the negative impact on a population may not know that certain demographic groups may be harmed differently than others.
Where do we go from here? At the moment it is not clear.
Read more: Commerce Department’s NIST Unit Seeks Comments on Draft AI Rules for the Financial Sector