LendingClub, PayPal Results Show Consumers Embracing Credit Alternatives Amid Rising Rates

The consumer is resilient. But pressured.

And examining options to battle back against rising interest rates and inflation.

Earnings results from any number of banks and payments networks have pointed to a continued willingness on the part of U.S. consumers to use credit cards to spend in pursuit of what they need.

And yet: Results from some of the digital platforms, geared toward serving consumers with lending products, with new payment options — installment payments among them — are seeing at least some caution on the macro front. Consumers may be looking to offset the pressures of variable interest rates.

To that end, as noted in this space this past week, LendingClub’s new loan originations came in at $3.2 billion (up 5% from the most recent quarter). Deposits, the company said, soared by 68% to $4 billion.

This activity helped drive quarterly marketplace revenues by 6% to $180 million in the latest quarter (and up 120% year over year), after a 2% dip in the fourth quarter.

As for credit quality, the company said in its filings that delinquency rates remain “well below pre-pandemic levels” and are normalizing within expectations.

Read also: LendingClub Deposits Grow 68% in Wake of Radius Bancorp Acquisition

LendingClub CEO Scott Sanborn said during the conference call that “we expect our customers who have an average income of more than a $100,000 to be particularly resilient. They are overall in great shape, strong balance sheets that did not disproportionately benefit from stimulus packages and are therefore not overly affected by their spending.”

But, he noted, the company is continuing to tighten underwriting “on the margin” to stay ahead of pressures.  Among the biggest drivers of results has been credit card balances — as Sanborn said, “the primary use case that we target.” Consumers have been increasing revolving balances, he said, and are now looking for ways to tackle that debt.

BNPL Gains

As for PayPal, CEO Dan Schulman noted that the company’s buy now, pay later (BNPL) franchise continues to see gains, where volume was up 256% year on year to $3.6 billion, and with 18 million customer accounts choosing this option. PYMNTS and PayPal, of course, have found a growing enthusiasm for BNPL, particularly among younger consumers.

Read more: PayPal’s Buy Now, Pay Later Volumes Surge 256%

Given the fact that recent PYMNTS/LendingClub research has found that more than 60% of consumers live paycheck to paycheck, it’s no surprise that individuals are looking for more efficient ways to manage everyday spend across a diverse set of options.

And in an interview with PYMNTS, Anuj Nayar, financial health officer at LendingClub, said that “inflation is affecting everybody’s pocketbook, no matter if you are at the higher or the lower end of the income spectrum.

“There’ll be belt tightening, and there’s no time like the present to step back and take stock. That means focusing on where to cut back on spending, while also building up the cash cushions that are needed to navigate the paycheck-to-paycheck economy.”

See also: Inflation Forces Further Belt-Tightening Among Already Tight Paycheck-to-Paycheck Consumers