What is warehouse lending, and how does it fuel fintech disruptors?

Despite ongoing economic uncertainty, fintech disruptors are on the rise. Led by buy now, pay later stalwarts like Afterpay (ASX:APT) and Zip Co (ASX:Z1P), this fusion of finance and tech is out to challenge the big banks.

But to get ahead in an increasingly aggressive market, fintech stocks are turning to an unlikely ally: their competitors.

There’s a couple of ways a fintech can do this, but warehouse lending has recently emerged as an attractive option, thanks to the secure financing and endorsement it provides growing lenders.

So what’s in it for the companies which cooperate and compete with big banking? And which businesses have used this strategy to fuel their growth?

The fintech boom

In recent years, fintech stocks have garnered attention from investors and consumers alike. According to multinational accountant KPMG, global investors poured $25.6 billion into fintech businesses over the first half of 2020.

And while the fusion of finance and tech is a broad banner, it’s non-bank creditors which have recently come to the fore. Put simply, they can offer the ease of digital lending outside the parameters of traditional lenders — a key factor in their growing popularity.

As a result, the fintech revolution encouraged new players to join the space. But on the flip side, it also triggered market saturation, leaving some companies vulnerable to merger and acquisition activity. In its fintech trends report, KPMG predicted a spike in fintech consolidation over 2020’s second half.

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Source: What is warehouse lending, and how does it fuel fintech disruptors? – The Market Herald