NCFA Fintech Confidential December 2020 (Issue 3)

THE
RISE
IN BIG
TECH AND
FINTECH
CREDIT
As a Gen Z, technology has played a big role
in my everyday life ever since I was young and
now as a remote intern at NCFA, I’m excited
to share some research and insights on Big
Tech and Fintech credit markets.
Big Tech and its expanding dominance
Lending institutions such as banks and credit
unions have traditionally been the chief sources
of finance in most economies in the world,
however large technology firms are uniquely
positioned to capitalize on a technologyfocused
alternative to financial services. Their
advanced AI and machine learning capabilities
allow these companies to utilize the swaths
of data that their user base generates to
tailor prices, determine creditworthiness, and
screen loans. Amazon’s e-commerce sales for
example, reached a staggering $416.48 billion
in 2020. As online channels expand due to
general trends and the global pandemic, they
pose an existential thread to traditional brick
and mortar models. UBS analysts estimate
that 75,000 brick-and-mortar stores could be
forced into closure by 2026.
Companies like Walmart have seen their
supply-side economies of scale diminished by
competing and efficient online marketplaces
that operate with lower overheads forcing
them to integrate more technology into their
business model. Walmart has already taken
several steps in the Fintech credit direction.
One is the creation of Walmart Pay, a payment
app that enables shoppers to transact at the
register via QR code. Other methods adopted
include a prepaid card plan with Walmart
MoneyCard and a money transfer service
with Walmart2Walmart.
Global Alternative Credit Trends
As illustrated in the chart below, there has
been a surge in popularity in Fintech and Big
Tech credit – collectively known as alternative
credit – reaching an estimate of 795 billion USD
globally in 2019. While alternative credit has
been on rise collectively, the data shows that
global Fintech credit volumes have declined
between 2017-2019 from an estimate of 410
billion to 223 billion USD. One major factor for
this decline is due to the greater regulatory
developments in China. In the same period,
Big Tech credit growth has surged at a more
rapid pace than the previous years, rising from
an estimate of 197 billion in 2017 to 572 billion
USD in 2019.
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