FinTech Lenders Chase the One Thing Banks Already Have

FinTech March quarter results have pointed to borrower growth and loan demand.

And a deeper dive into executives’ comments and the platform metrics reveal, too, a shift in funding and business models.

Management teams spent time discussing access to borrowers and more time discussing access to capital. But they talked about deposits, warehouse facilities, forward-flow agreements, securitizations and committed funding relationships. They discussed bank charters, balance-sheet flexibility and funding resilience.

Those are subjects that traditionally dominated banking earnings calls. Increasingly, they are dominating FinTech earnings calls as well.

Across earnings calls from Upstart, LendingClub, SoFi and Affirm—a cross section that is by no means exhaustive of the FinTech lending pantheon—executives repeatedly returned to a common theme: Investor demand is strong, but the companies that emerge strongest from the next credit cycle will likely be those with the greatest control over the capital behind their loans.

During FinTech’s first growth wave, the emphasis was on acquiring customers and proving that technology could improve underwriting and distribution. But the move is now about building funding models that remain dependable regardless of market conditions.

The numbers suggest there is still plenty of capital available.

During Affirm’s presentation accompanying its latest results, and during separate investor day details, management said the company has built relationships with roughly 200 funding partners across warehouse facilities, asset-backed securities investors and forward-flow buyers. The company said it has raised more than $7 billion through note offerings during the past two years and has seen a 3.4-times oversubscription rate on its ABS offerings since 2022. Management also disclosed approximately $13 billion of forward-flow capacity supported by insurance companies, pension funds, asset managers and investment banks.

The comments highlighted a recurring theme across the sector: Investor demand remains important, but management teams increasingly want funding sources they control.

Funding Flexibility Becomes a Differentiator

Upstart’s earnings disclosures reflected some similar trends.

The company reported first-quarter loan originations of $3.4 billion, up 61% year over year, while revenue increased 44% to $308 million. The company also originated 425,000 loans during the quarter.

Chief Executive Dave Girouard used the call to reinforce that Upstart remains fundamentally a marketplace business.

“Our funding of loans will continue to be one that relies primarily on third-party capital,” Girouard told investors. Seen in this light, management is looking to strengthen funding relationships while simultaneously pursuing a national bank charter that could broaden funding options and improve operating flexibility. Upstart’s earnings materials highlighted securitizations, committed-capital arrangements, warehouse facilities and whole-loan sales as important components of that strategy.

LendingClub entered the quarter from a different position.

The company reported $2.7 billion in originations, up 31% from a year earlier. Management repeatedly pointed to the advantages of operating as what it describes as a digital marketplace bank.

Unlike marketplace lenders that depend largely on institutional investors, LendingClub can draw upon both deposits and marketplace capital. Chief Executive Scott Sanborn described the company’s ability to combine those funding channels as a strategic advantage as economic conditions evolve. The result is greater flexibility in deciding which loans remain on balance sheet and which are distributed to investors.

SoFi’s results underscored the value of that flexibility at larger scale. Chief Executive Anthony Noto could be heard on the call discussing the interaction between SoFi’s balance sheet and its loan platform business. Management explained that the loan platform allows SoFi to originate additional volume beyond what it would otherwise retain while maintaining control over capital deployment decisions.

Noto noted that the company originated $12.2 billion of loans during the quarter, including $9.2 billion through its lending segment and $3 billion through the loan platform business. He described the platform as a mechanism for serving more borrowers while diversifying revenue streams and funding sources.

Taken together, the calls point toward a subtle but meaningful shift in how lending platforms are competing.

Five years ago, the primary question was whether FinTechs could attract borrowers.

Today, that question has largely been answered.

The evolution is now focused on how loans are funded and whether funding remains available when markets become less accommodating.

Investor demand remains healthy. Affirm’s institutional funding relationships provide evidence of that. Marketplace lending remains viable. Upstart’s growth demonstrates that. Deposits continue to matter. SoFi and LendingClub have shown that as well.

As lending technology becomes more widely available and underwriting models continue to improve, funding may become the industry’s most important differentiator. The platforms that secure durable capital sources will have greater freedom to grow, retain economics and navigate downturns. Those relying solely on market appetite may find themselves more exposed when conditions change. This earnings season suggested that many of the sector’s largest players already understand that reality.