With concerns over the banking system dominating the news after the collapse of Silicon Valley Bank and others, it can be easy to lose sight of another consequential problem: financial access. Although the challenge of financial inclusion is most acute in developing countries, it remains an issue in America too — primarily in the form of credit access.
A national survey from the Federal Reserve Bank of New York showed that amid fears of continued price inflation, consumers’ perceptions of credit access are worsening. Consumers see diminishing prospects of obtaining credit, with those saying 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 difficulties in obtaining financial products.
The “FinTech Tracker®” examines the problem of consumers’ diminishing access to traditional credit and how FinTechs are helping by providing consumers with alternative lending options and ways to improve their credit scores.
Around the FinTech Space
A Consumer Financial Protection Bureau (CFPB) study indicated that financially distressed consumers are saving through buy now, pay later (BNPL) services. If BNPL borrowers make payments on time, they pay zero interest. In contrast, the CFPB estimated most BNPL borrowers would have encountered interest rates between 19% and 23% using credit cards.
In a Federal Reserve survey on bank lending practices, a considerable share of financial institutions (FIs) reported having tightened lending standards for credit card loans. Many FIs, the Fed found, reported increasing minimum credit score requirements, reducing credit limits and restricting the number of loans granted to consumers below credit scoring thresholds.
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 circle, 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 consumers and FinTechs alike.
FinTechs Have an Opportunity to Improve Consumers’ Credit Capabilities
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 U.S., however, the emergence of mobile technologies has created opportunities to expand credit access to underserved households.
FinTechs are increasing credit availability through more affordable and accessible lending options, such as BNPL, helping those who would otherwise resort to payday loans and other expensive lending types. FinTechs also empower consumers to improve their credit profiles and thus broaden the types of services they can qualify for.
To learn more about how FinTechs are addressing the problem of consumer credit access, read the Tracker’s PYMNTS Intelligence.
About the Tracker
The “FinTech Tracker®,” a collaboration with Sezzle, examines the problem of consumers’ diminishing access to traditional credit and how FinTechs are helping by providing consumers with alternative lending options and ways to improve their credit scores.
The post 40% of Millennials Could Improve Credit Access With FinTech Solutions first appeared on PYMNTS.com.