Fintech Lenders Compete for Borrowers, but Funding Costs Differ

Upstart, Affirm and SoFi are competing for many of the same consumers, but they do not carry the same funding costs. In fintech lending, where margins can be tight, how a company pays for the loans it originates can shape pricing, risk appetite and growth.

SoFi is the outlier among the three because it funds lending with deposits. That gives it access to a relatively stable and often cheaper source of money than lenders that must tap wholesale funding markets. Deposit funding can also provide more flexibility when credit conditions shift or investor demand for loan-backed securities cools.

Upstart and Affirm do not have that same deposit base, so their models depend more on other channels to finance originations. That structure can work well when capital is abundant, but it can become a disadvantage if funding costs rise or markets become selective. The expense of lending is therefore not just about credit losses; it is also about the cost of the money used to make the loans.

The comparison highlights a broader split in fintech. Companies without bank charters may struggle to match the economics of deposit-funded rivals, especially if they target similar borrowers. For investors, the key question is whether scale, underwriting and brand can offset a higher cost of funds.