Fintech companies continue to increase their share of the personal loan market.
That’s according to a recent survey from TransUnion that shows fintech loans now comprise 38 percent of all unsecured personal loan balances, the largest market share compared to banks, credit unions and traditional finance companies.
Five years ago, fintechs accounted for just 5 percent of outstanding balances. As a result of fintech entry into the market, bank balance share decreased to 28 percent from 40 percent in 2013, while credit union share has declined from 31 percent to 21 percent during this time.
Overall, personal loan balances increased $21 billion in the last year to close 2018 at a record high of $138 billion.
“Fintechs have helped make personal loans a credit product that is recognized as both a convenient and simple way to obtain funding online,” Jason Laky, senior vice president and TransUnion’s consumer lending line of business leader, said in a statement. “More and more consumers see value in using a personal loan for their credit needs, whether to consolidate debt, finance a home improvement project or pay for an online purchase. Strong consumer interest in personal loans has prompted banks and credit unions to revisit their own offerings, leading to more innovation and choice for borrowers from all risk tiers.”
TransUnion also found that fintechs are competitive with banks, with both lenders issuing loans averaging in the $10,000 range, compared to $5,300 for credit unions. Across all risk tiers and lender types, the average unsecured personal loan debt per borrower was $8,402 as of the fourth quarter of 2018.
Personal loan originations increased 22 percent during the third quarter of 2018, marking the fourth consecutive quarter of 20 plus percent annual origination increases.
While the subprime risk tier grew the fastest, prime and above originations represented 36 percent of all originations. More than 19 million consumers now have a personal loan product, an increase of 2 million from a year earlier in the fourth quarter of 2017 and the highest level ever observed.