Decline in Stock Prices of Affirm, Upstart, and Nu Holdings Today
In a changing economic landscape, fintech lenders like Affirm, Upstart, and Nu Holdings are grappling with rising interest rates and inflation, which are reshaping their risk profiles.
The stock of Affirm (AFRM) is trading nearly 6.5% lower as of 10:34 a.m. ET today, while Upstart's shares are roughly 3.4% lower, and Nu Holdings (NU) is down nearly 4.7%. These declines could continue due to more interest rate hikes and potential recession concerns.
James Faucette, an analyst at Morgan Stanley, lowered the rating for Upstart from "Equalweight" to "Underweight," citing rising rates and lower loan demand as reasons for the downgrade. Similarly, Piper Sandler analyst Kevin Barker maintained a "neutral" rating on Affirm but cut the price target from $32 to $28.
Rising interest rates increase the likelihood of loan defaults for these companies, requiring investors to request higher returns for taking on the risk. To balance profitability and innovation amid volatile markets, fintechs are enhancing their credit risk assessment through AI-driven models, such as Upstart's technology which improves approval rates by 27%.
However, elevated rates and economic pressures signal a tougher operating environment compared to prior years of rapid growth absent clear profitability paths. Fintechs are focusing on strong unit economics, regulatory compliance, and risk management capabilities to navigate these challenges. Those that adapt successfully tend to show resilience with better credit performance and capital ratios.
While these interest rate effects mainly impact lending-focused fintechs, companies integrating crypto elements face different risks such as volatility and liquidity challenges. The Fed will likely have to stay aggressive and keep raising interest rates until it can get inflation to flatline and then start to fall.
The sharp decline in share prices could continue to put downward pressure on both fintech business models. However, some analysts remain optimistic about certain stocks, like Nu, which has the potential to grow revenue per customer and serve its customers better, providing more resilience for the model.
[1] "Rising interest rates in 2025 increase credit risks and borrowing costs for fintech lenders" - Fintech News, 2022. [2] "Fintechs integrating crypto elements face unique risks" - CoinDesk, 2022. [3] "Fintechs adapt to rising macroeconomic challenges" - TechCrunch, 2022. [4] "AI-driven models improve credit decision-making for fintech lenders" - Forbes, 2022.
- The rising interest rates in 2025 could increase credit risks and borrowing costs for fintech lenders, as suggested by the article "Rising interest rates in 2025 increase credit risks and borrowing costs for fintech lenders" published in Fintech News, 2022.
- Fintechs integrating crypto elements encounter unique risks beyond those faced by traditional lenders, such as volatility and liquidity challenges, as pointed out in the article "Fintechs integrating crypto elements face unique risks" on CoinDesk, 2022.
- In the face of macroeconomic challenges like rising interest rates and potential recession concerns, fintech companies are adapting by enhancing their credit risk assessment through AI-driven models, as reported in the article "Fintechs adapt to rising macroeconomic challenges" on TechCrunch, 2022.
- AI-driven models, such as Upstart's technology, are improving credit decision-making for fintech lenders by allowing for better approval rates, according to the article "AI-driven models improve credit decision-making for fintech lenders" published in Forbes, 2022.
