“Fintech lenders” have more to do before I call them “artificially intelligent”. The pandemic was a blindside but they seem to be operating the same way they were before. They continue to focus on historical data to fine tune “algorithms” to predict the success or failure of a loan.
Very high rates are needed to support this “learn as you go” approach. Competition is fierce, maintaining a growing portfolio is expensive and then there is bad debt. Fees are pushed as high as possible and terms are confusing to business owners. The better paying accounts are encouraged to renew often and borrow more.
Fintech lenders are able to lower overall delinquency by adding new loans and they do that by tweaking their algorithms. Marketing focuses on making the application easier and receiving money faster. The fintech lending industry seems to be back on the same dangerous path it was before.
The good news in fintech lending is that new cashflow services are available to a greater variety and size of business. A short time ago only very large, successful businesses could take advantage of them. Today the chances of a small business growing and succeeding because these services are available and affordable is much greater.
There is also the interesting trend of integration between lenders and financial service providers. This is a better and faster way to lower risk and expense and will eventually lead to improved financing programs. The pandemic showed us how important SMEs are for our well being and standard of living so let’s hope fintech lenders can figure it all out and quickly.