Consumer Loans Harder to Track in Private Credit Era

The rise of so-called “alternative consumer lending” has made loans tougher to track.

As The Wall Street Journal (WSJ) reported Tuesday (Dec. 9), private credit has exploded into this landscape, helping fund loans from FinTech firms to consumers. The report cites an analysis from KBW showing that such funding could support close to $140 billion in lending globally over the next few years. That is up from less than $10 billion in 2024.

According to the report, this lending includes things like buy now, pay later (BNPL), along with other types of personal loans. The WSJ contends that if more lending is funded through private deals, it could transform the way investors think about data regarding consumer debt.

The report notes that the typical places people might go to gauge borrower health — credit card and loan information or bank data from regulators — could miss the status of borrowers who depend on privately-funded lending.

With banks focusing on higher-credit or wealthier credit card customers, the WSJ added, getting more credit to consumers left behind by that trend can boost the economy.

However, this also increases the risk that investors may not spot warning signs as easily. Examining consumer data “becomes a lot more fragmented, and therefore harder to get a complete picture without doing a lot of legwork,” KBW analyst Sanjay Sakhrani told the WSJ. “And even then it may not be complete.”

Writing about the private credit landscape earlier this week, PYMNTS noted that this industry is often painted as lending outside the banking system, even though banks are still deeply tied to private credit.

For example, banks offer credit lines, financing facilities and risk transfer instruments that help fund managers originate new loans.

“That indirect role means banks share exposure to borrower performance,” the report added. “When private credit funds need liquidity or restructuring support, that risk can appear on bank balance sheets even when traditional financial institutions did not underwrite the original deal.”

Increasing interest in real-time data reflects that interdependence. If banks and private credit firms are witnessing the same day-to-day financial behavior from borrowers, pricing and risk management become more coordinated.

Recent PYMNTS coverage has found that institutions are taking a closer look at shared data standards at times when credit conditions shift.

Private credit, that report concluded, shows no indication of slowing, with investor demand remaining strong.

“Real-time data helps lenders evaluate creditworthiness continuously rather than periodically. Better transparency could make private credit expansion more stable for lenders, banks and especially for the borrowers who rely on continued access to capital,” PYMNTS wrote.