Financial markets have recently witnessed a disruptive force: the rise of online intermediaries and, more generally, fintech companies, i.e., firms that apply technology to improve financial activities. Fintech companies have targeted the consumer credit market, which is one of the largest credit market, with outstanding credit of $3.8 trillion. We show two key results. First, while fintech companies target consumers with higher FICO score, fintech borrowers are more likely to default ex post. This result is due to borrowers using the fintech loan to fund additional expenses rather than to consolidate their existing debts, which leads them to be overextended. Second, in contrast to the narrative that fintech use alternative data, we find that fintech companies tend to focus on the hard information contained in the credit reports, more so than traditional banks. In the same spirit as regulators introduced the "ability to repay" rules for mortgage products in the aftermath of the subprime crisis, regulators might be need to more closely monitor the borrowers' ability to service their unsecured debt and the way these additional funds are actually used by the borrowers.
