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Disrupting banks when interest rates are near zero is in some ways playing on easy mode writes the WSJ. As rates rise, the game will get harder—but certainly not impossible for the challenger brands.
Newer players also can adopt different funding models. Upstart Holdings UPST -10.67% works with banks to enable them to make loans using its artificial-intelligence underwriting technology; its funding costs are in effect their funding costs. Some online consumer lenders have even become deposit takers themselves: LendingClub LC -2.53% acquired a bank and is now using deposits to fund loans. The same roughly $3 billion in loan origination volume in the fourth quarter earned LendingClub nearly $30 million more in net income than it did in the same period in 2019.
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