The Early Days of Fintech Lending

While digitization and online technologies had long been available, innovation in small business lending was slow. This chapter traces the first wave of fintech lending to small businesses, recounting the rich history of the early disruptors and how they addressed, with technology, some of the long-standing frictions in the traditional small business lending market. This fueled a “wild west” period, featuring hundreds of new entrants. But the expected acceleration of the new markets never occurred; instead, they hit nasty bumps in the road, propelled in part by poor decisions and the fact that incumbent banks possessed important competitive advantages—access to many loyal customers and low-cost capital in the form of deposits. This chapter sets the scene for a later discussion of the potential winners and losers in the current fintech landscape.