Feb. 21 (UPI) -- More Americans are using digital-first financial technology companies for credit purposes rather than going through traditional banks, new data from TransUnion found.
So-called fintech companies issued 38 percent of all unsecured personal loans in 2018, up 35 percent from the previous year, TransUnion's fourth quarter 2018 Industry Insights Report found. Going back to 2013, only 5 percent of loans came from fintech companies.
This also means that banks and credit unions are seeing their market share decline. Bank loans decreased from 40 percent in 2013 to 28 percent in 2018. Credit unions fell from 31 percent in 2013 to 21 percent in 2018.
"The rapid growth in consumer loans sits squarely on the shoulders of fintechs," Jason Laky, senior vice president and leader of TransUnion's consumer lending line told CNBC. "They continue to be the main driver."
The unsecured personal loan doesn't require any collateral. Companies like SoFi, LendingClub, Prosper, Avant and GreenSky are digital or mobile-first lenders that use metrics other than a credit score to determine creditworthiness.
There's also a risk because so many of the borrowers are considered subprime.
"Subprime borrowers are the ones that if the economy turns and growth slows are likely to be at risk of losing their jobs or hours, that creates financial stress," Laky said. "As long as we believe economy is still on solid path of growth there shouldn't be an issue."