Debt, Data, and the New Repayment Hierarchy
Happy Wednesday, Fintech Listeners!
It’s a big day! Today, we are launching the newest ‘show’ within the Fintech Takes podcast feed!
Since Bank Nerd Corner has now been spun off into its own delightfully nerdy weekly podcast, with Kiah Haslett at the helm (subscribe, obviously), it’s time to replenish the fintech well with something entirely new.
And that something new is Facing Credit.
I’ll be joined by a select, rotating cast of excellent guest hosts to unpack what’s really happening inside lending right now; the stories that make headlines, the challenges that operators are dealing with behind the scenes, and informed speculation about what’s going to happen next.
As I like to say around here, lending is a learning business. And this new podcast feed will be an excellent way for me (and hopefully you) to learn
Ready? Here we go!
— Alex
3 BIG IDEAS FROM THE PODCAST
To kick off the inaugural episode of Facing Credit, I pushed “1” on my lending expert speed dial.
Kevin Moss, former Chief Risk officer for the Consumer Lending Group at Wells Fargo. Former Chief Risk Officer at SoFi. Advisor and consultant to many in the fintech space. Writer of smart thoughts.
In this episode, we dive into three interesting areas: student loans, open banking, and credit scoring.
Tune in for the full conversation here
And read below for my three big ideas...
#1: The Student Loan AwakensCopy anchor linkCopied
For years, repayment data on federal student loans didn’t flow to the credit bureaus. The pause — first on federal student loan repayment and then just on furnishment of repayment data to the credit bureaus — created a hole in the credit system.
That hole closed earlier this year.
As of January, repayment data is finally flowing back to bureaus.
And starting in May of next year, the government will be able to garnish up to 15% of wages for those in default. (Around 2M people are already at risk, with more likely to follow.)
Kevin walked through what that means in practice, which goes like this:
About 25-30% of customers in any portfolio have at least one government student loan. FICO attributes 35% of its score separation to repayment history; so when that history disappears, scores inflate. When it returns, they fall fast.
That’s the mechanical shift. But beneath it is a philosophical one.
For decades, student loans were treated as an entitlement.
In the past, the government muscled out private lenders, made loans easy to get, and was more or less relaxed in collections because the point was to get as many people college degrees as possible. That policy objective is no longer our North Star.
Instead, the new mindset sounds quite a lot like, well, any traditional lender trying to get paid back (cap loan amounts, focus on repayment, and if borrowers need more, offer up the private market).
Kevin went a step further, suggesting that a Republican-led government could hand student lending back to private lenders; a move that could dramatically alter the accessibility of college for low-to-moderate income students.
This shift has real credit implications.
Now that repayment data has resumed after a three-year pause, and inflated credit scores are dropping fast. But it also has the potential to reshape the overall debt hierarchy.
When the government can (and does) garnish wages and withhold tax refunds, student loans may jump up the repayment hierarchy (potentially ahead of credit cards, auto loans, even mortgages).
The student-loan restart isn’t just about delinquency data; it’s also a kind of philosophical reset.
What was once treated as a public good is being enforced like private credit, and the government has decided to collect first.
🎬 DIRECTOR'S COMMENTARY
The subtext of the philosophical shift we are seeing in student lending is, obviously, the new economic uncertainties facing young adults. Is college, which is dramatically more expensive than it used to be, still a good deal? Does it still guarantee you a good job and a chance at a prosperous life? How will the rise of AI further alter this deal?
Kevin and I didn’t get into this subtext too much in the episode, but it’s the question that we need to be asking right now (and continue to ask, even when we have a less chaotic executive branch).
#2: Charging by Usage vs. Charging by PurposeCopy anchor linkCopied
Open banking, pricing sheets for aggregators, cash flow underwriting — these are a few of my favorite things!
Obviously, if you read Fintech Takes you already know this. So, I tagged Kevin into the never-ending conversation since Kevin’s lived on both sides of the argument (banking and fintech).
For Kevin, JPMC’s decision to charge for its data isn’t a hostile act; it’s normalization. Banks should have the opportunity to recover their costs.
But his next point was the important one. The way pricing is structured matters more than the price itself.
Charging by usage (i.e., how often someone hits your API) makes sense. It aligns with the fees with the costs the fees are meant to offset.
Charging based on the purpose of the data (i.e., what it’s being used for) ... doesn’t.
In Kevin’s words, the real risk is that higher fees for payments use cases could tilt the market, which seems to be one of JPMC’s objectives, as it continues to insist that data aggregators pay it more for those use cases than for non-payments use cases.
Pricing has consequences far beyond revenue. It decides who gets to build, what use cases survive, and whether innovation stays open or consolidates.
Still, this doesn’t spell the end of cash-flow underwriting; it marks its next phase.
Kevin’s view is that over time, the best credit models will merge credit bureau and bank data because they are deeply complementary (or ‘orthaganal’ to use a more mathematical term). Lenders need both and will likely be willing to pay for both (even if the cost for the bank data goes up a bit).
#3: The (New) Eras TourCopy anchor linkCopied
For nearly thirty years, mortgage lenders didn’t buy FICO scores from FICO. They got them through the credit bureaus (and usually through resellers) as part of a bundle. Fannie and Freddie required it. The bureaus marked it up. Everyone made money.
That era just ended (see here and here).
The FHFA formally approved VantageScore 4.0 as a rival to FICO (ending FICO’s exclusive role in credit scoring for conforming mortgages). In response, FICO cut the bureaus out and started selling scores directly to lenders (keeping the existing bureau markup for itself). Equifax fired back by dropping VantageScore prices, bundling them with income, employment, and fraud detection tools, and pledging free VantageScore access to lenders who buy FICO scores in 2026.
Kevin has seen both sides of that relationship. He knows what happens when distribution chains break; when you disaggregate the score from the file, you change buyer behavior.
Lenders that once saw FICO as unquestionably necessary (like breathing or watching play-off baseball) are now asking what they’re paying for. The big mortgage lenders already use custom, homegrown models to make decisions, pulling the FICO score only to satisfy investors or regulators. Now they can play FICO and Vantage against each other or drop one entirely.
And with cash flow data entering the underwriting stack, the generic credit score becomes just another input, not (in any sense) the final word on risk.
But we can also call it what it is: a forced marriage that finally broke apart.
The breakup doesn’t blow up the market. It opens it. The credit bureaus can compete on bundles. Lenders can negotiate. FICO has to innovate.
Should make for an exciting next couple of years!
WHAT I'M LISTENING TO
#1: Navigating the New Frontier of Stablecoin with Alex Johnson (The Community Bank Podcast) 🎧Copy anchor linkCopied
I was honored to get the opportunity to go on the Community Bank Podcast and talk about stablecoins with SouthState’s Chris Nichols.
Chris is incredibly knowledgeable about stablecoins and curious about their potential, but he’s also clear-eyed about their flaws and the challenges they will have supporting different use cases.
As such, he made a wonderful conversation partner on this topic!
#2: Vertical SaaS: Fintech Disruption by a Thousand Cuts: Go To Market (Fintech Takes) 🎧Copy anchor linkCopied
Episode 5 in our podcast series with Pipe on vertical SaaS!
This one dives into the world of vertical SaaS for gyms, fitness studios, and personal trainers, and it focuses on how vertical SaaS companies take their products to market.
Luke and I both learned a lot in this episode. I hope you do too!
MONEY20/20 SPOTLIGHT
It’s officially Money 20/20 season, which means I’ll be highlighting a handful of sessions, meetups, and happenings in every newsletter.
💰 Deepfakes, Real Risk: Fighting Fraud in an Age of Synthetic Identity | 10/26 | 3–3:30pm PT
I’m thrilled to be moderating this discussion at Money20/20, featuring the head of fraud at Varo and the co-founders and CEOs of SentiLink and Oscilar.
🍽️ Leaders in Fintech Dinner | 10/26 | 6–9pm PT
Join Luke Voiles (CEO of Pipe) and yours truly for an intimate evening of sushi, sake, and smart conversation. It’ll be an exclusive gathering of fintech execs and leaders. Space is limited; request to join us here.
☕ Nova Credit Coffee + Conversation | 10/27 | 8:15am–10:30am PT
Start the AM with lending leaders unpacking the real-world journey of cash flow analytics (where to begin, how to apply it, and what it takes to make it work). Breakfast, networking, and discussion included! RSVP here.
🍸 MX Happy Hour Panel: Data into Action | 10/27 | 3:30pm–6pm PT
Small panel conversation featuring Jane Barratt (Chief Advocacy Officer, MX) and yours truly (among others!), followed by drinks and hors d’oeuvres at The Grand Lux Cafe, Venetian. RSVP here.
🍸 Fundbox After Hours | 10/27 | 7:30pm–9:30pm PT
Come for the conversation on the future of embedded finance and small business lending. Stay for the one-on-one conversations (over drinks and appetizers, of course!)
🥯 Astrada Breakfast Discussion | 10/28 | 8–10am PT
Join Salman Syed (CEO of Astrada) and yours truly for a lively AM conversation on data, AI and open banking. Who will win as the battle lines are redrawn? Bring your hunger and curiosity to Bouchon at The Venetian. RSVP here.
WHERE ELSE I'LL BE
💻 What’s the Best Way to Protect Consumers (and Lenders)? | 11/6 | ZoomCopy anchor linkCopied
Millions of consumers are just one financial surprise away from crisis.
That’s why banks and lenders need to rethink the protection tools they offer (and how they communicate the value prop of those tools to their customers).
On Nov 6, I’m sitting down with some industry experts to dig into this topic.
We’ll cover:
- Better protection programs that fit digital-first consumers.
- Reducing portfolio risk while staying compliant
- Turning protection into trust — creating value your customers actually want to buy
- Growing non-interest income
RSVP before Nov 5 and you’ll get put into a drawing to win a Fintech Takes hoodie!
Thanks for the read! Let me know what you thought by replying back to this email.
— Alex
