Banking as a service, Business of Fintech, Member Exclusive
The infrastructure layer is still up for grabs as firms compete to establish its architecture
- Fintechs are moving from partners to principals — applying for charters, building proprietary rails, and underwriting from their own data
- The sponsor bank model isn't dead, but it's under pressure as firms like Affirm and SoFi bet that owning the infrastructure beats renting it
Block extended $200 billion in credit across Cash App, Square Loans, and Afterpay by solving a problem the traditional credit system created. “If a seller doesn’t have a fingerprint in a traditional business bureau file, they just couldn’t get a loan,” Juan Hernandez, Block’s head of credit and underwriting, told Tearsheet. “They might fall back on a consumer report at a traditional lender, and even then weren’t getting the access they needed. Or they’d have to go through mountains of paperwork.” Block’s answer was to underwrite from first-party data native to its own ecosystem – merchant processing volume for Square and financial behavior for Cash App – building models that are predictive in ways legacy credit infrastructure isn’t. … 