Prior to the COVID-19 outbreak and made more urgent by its financial impact on low-income households and households of color, the Federal Reserve Bank of San Francisco’s Fintech Team and the Aspen Institute’s Financial Security Program has been exploring how the greater racial equity goals in financial systems intersects with the growing field of digital financial technology, or fintech.

A new working paper by the Federal Reserve Bank of Philadelphia used loan-level data from two fintech lenders, Funding Circle and LendingClub, to assess how the companies’ pre-pandemic lending patterns differed from those of traditional banks. The report finds fintechs contribute to a “more inclusive” financial system, expanding credit to more companies and at a lower cost.