International regulator issues report on FinTech Credit

Today the Bank for International Settlements (BIS) published a report on FinTech credit with a view to market structure, business models and financial stability implications.

FinTech credit refers to credit activity facilitated by electronic platforms. This usually involves borrowers being matched directly with investors, although some platforms use their own balance sheet to lend. FinTech platforms facilitate various forms of credit, including consumer and business lending, lending against real estate, and business invoice financing. There is also variation in the creditor base of FinTech credit platforms: some source funding mostly from retail investors, while others use significant funding from institutional investors, banks and securitisation markets.

Academic surveys on lending volumes in 2015 show considerable dispersion in FinTech credit market size across jurisdictions. In absolute terms, the largest FinTech credit market is China, followed at a distance by the United States and the United Kingdom. In general, FinTech credit is a small fraction of overall credit across jurisdictions, but it appears to be growing rapidly, and it may have much larger shares in specific market segments.

The report considers the implications for financial stability should FinTech credit grow to account for a significant share of overall credit. Potential benefits include access to alternative funding sources for borrowers, a lower concentration of credit in the traditional banking system and pressure on incumbent banks to be more efficient in their credit provision. At the same time, systemic risk concerns may arise, such as weaker lending standards and more procyclical credit provision in the economy. FinTech credit also poses challenges to the regulatory perimeter and authorities’ monitoring of credit activity.

The BIS statement and the full report are available here.

Lavanya Rathnam

Lavanya Rathnam is an experienced technology, finance, and compliance writer. She combines her keen understanding of regulatory frameworks and industry best practices with exemplary writing skills to communicate complex concepts of Governance, Risk, and Compliance (GRC) in clear and accessible language. Lavanya specializes in creating informative and engaging content that educates and empowers readers to make informed decisions. She also works with different companies in the Web 3.0, blockchain, fintech, and EV industries to assess their products’ compliance with evolving regulations and standards.

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