FinTech Companies Extend a Helping Hand to Subprime-Borrowing Consumers

Consumers grappling with low credit scores are finding potential relief as FinTech companies step in to offer assistance, aiding them in their quest for improved financial stability, according to PYMNTS. 

The ramifications of financial setbacks can have enduring effects on individuals whose credit scores have suffered due to these missteps. This reality has been highlighted in the collaborative report «The Credit Accessibility Series: The Credit Insecure Need More Education,» produced by PYMNTS in partnership with Sezzle. The report delves into the tangible financial toll of being categorized as a subprime borrower.

One of the key findings of the report centers around the economic repercussions of enhanced credit scores. Among deep subprime consumers, whose credit scores fell within the range of 580 to 619, the report discovered that the average interest rate stood at 9.2%. This translated to an average interest payment of $6,922. Alarmingly, this amount represented a staggering 13% of their income. Faced with the challenge of staying afloat amidst everyday expenses, it is unsurprising that subprime borrowers are increasingly turning to credit cards and other lending options, despite an uptick in delinquencies.

Rising costs have compelled numerous consumers to make tough choices regarding their financial priorities. In a recent interview with PYMNTS, Ed Haluska, Chief Commercial Officer at Genesis Credit, shed light on the difficult decisions that consumers now confront and the nuances that differentiate their current financial predicament from past economic downturns.

Haluska pointed out that consumers had experienced a period where «money was falling from the sky,» characterized by easy access to credit and abundant liquidity fueled by government stimulus initiatives. However, with the waning of these government programs, individuals are now grappling with challenging dilemmas.

«Among the lower socioeconomic groups, the choice is between paying for essentials like milk and bread, putting gas in the car, or opting for elective medical procedures,» Haluska explained.

To counteract these challenges, certain FinTech companies are taking steps to help consumers burdened by subprime credit scores attain a more balanced financial footing. For instance, in May, i2c and Access Finance unveiled a collaborative effort to introduce the Juzt Mastercard program from Europe through i2c’s payments platform. Geared toward credit-constrained consumers with limited or no credit history, this international consumer credit card, operating on the Mastercard network, boasts higher approval rates. Additionally, it provides access to Apple Pay and Google Pay for its customers.

Other industry players, including Bond, are also contributing to the cause by offering secured cards to consumers with subprime credit. These initiatives provide a pathway for individuals to either establish or rebuild their credit scores, setting them on a journey toward enhanced financial well-being.