Fintech is taking the banking world by storm, and there’s both good news and bad.
The days of going to your local bank branch and filling out a loan application may be numbered. Now, if you want to get a mortgage loan or a car loan, there are dozens of websites where you can type in your information and receive offers within a matter of minutes.
Often, these lenders offer credit to folks who wouldn’t be approved by a traditional bank, and sometimes they even offer lower rates.
Wider access to credit means that underserved populations, such as low-income consumers, immigrants, and rural populations, have a better chance of affording a home or a car or simply covering an unexpected emergency without falling into unmanageable debt thanks to sky-high interest rates.
However, in its most recent Credit Card Market report, the Consumer Financial Protection Bureau (CFPB) warned that this increase in access comes with its own set of risks and unintended consequences, such as the potential for discrimination.
How technology is increasing access to credit
This increase in access is largely thanks to the fintech industry, which has leveraged increasingly sophisticated technology in fields like machine learning and data analysis to make the lending process more efficient.
A proportion of applicants who are rejected for having no credit or bad credit would actually have…