Why Lenders Like SoFi And Affirm Are Taking The Biggest Hits Among Fintech Stocks

Forbes

08-04-2025

Fintech lender SoFi has seen its stock drop 23% since last Wednesday. Six year ago, it bought naming rights to the Los Angeles Chargers' football stadium (pictured above).
Some of the largest financial technology companies that lend money to consumers, including SoFi, Affirm and Upstart, have seen their stocks fall more than 20% since last Wednesday, when President Trump announced tariffs affecting about 90 countries. The drop is significantly worse than what other categories of fintech companies have seen and about twice as bad as the S&P 500's slump over the same period.
Privately held fintech lenders we spoke with said they haven't yet started to reduce how much money they're doling out to customers, but they may start soon and have already begun to make other adjustments given the rising risk that tariffs will push the U.S. into a recession.
'People think that if the consumer is at risk of being seriously hurt by tariffs, then the lenders are going to be the first ones to fall. That's the knee-jerk reaction of the market,' says Dan Dolev, a managing director and fintech analyst at investment bank Mizuho. Last Friday, JPMorgan raised its estimate of the likelihood of a recession from 40% to 60%.
SoFi, the San Francisco fintech company founded in 2011 that got its start making student loans, has seen its stock fall 23% since last Wednesday even though its typical customer has an above-average FICO credit score of 746. Over the past two years, SoFi has aggressively expanded its personal loan business, reaching $17.5 billion in outstanding loans at the end of last year, up from $8.6 billion at the end of 2022. Consumers often use personal loans to refinance credit card debt or consolidate other loans.
'SoFi has been pushing much harder and much faster and ramping up marketing spend to keep growing and outpacing the group,' says Guiliano Bologna, a managing director at Compass Point Research who has a sell rating on the stock. Investors often believe fast growth means steeper losses if the economy deteriorates. Tim Switzer, a senior research analyst at KBW, estimates that, if SoFi's default rate increases by 1%, revenue could fall by nearly $200 million.
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Buy-now, pay-later giant Affirm has fallen 24% since 'Liberation Day' last Wednesday, when Trump announced the tariffs. It's one of the fastest-growing fintech lenders, with its total gross merchandise volume expanding 35% to $10.1 billion in the quarter ending in December 2024. Investors are worried that a potential recession could slow down that expansion, Bologna says. He disagrees with the market's reaction, adding that Affirm has been lowering its sales and marketing costs as a percent of the loans it issues, and that it benefits more strongly from repeat customers relative to other personal loan companies.
'We'll remember this as one of the best opportunities to buy these lenders' stocks,' says Dolev, who believes Affirm will also benefit from future decreases in interest rates.
Silicon Valley personal loan company Upstart, which lends mostly to customers with below-average credit scores, has seen its stock fall 25% since last Wednesday. 'When you're thinking about recession concerns, the unsecured consumer tends to get hit first, and subprime loans tend to get hit first,' Bologna says. If more borrowers start defaulting on their loans, demand for other companies to buy Upstart's loans through its platform business will probably shrink, says Bologna. It would also likely lead Upstart to raise its prices, causing fewer consumers to buy its loans.
Lending Club, an older personal loan company founded in 2007 that's considered one of the first fintech companies to be formed, has also seen its stock fall 20% since last Wednesday. Synchrony, an incumbent bank that offers branded credit cards and installment loans to Americans with lower credit scores and has a book of about $100 billion in consumer loans, has also seen its stock drop 20%, a harder fall than mainstream banks like JPMorgan Chase and Bank of America.
Privately held fintech companies are preparing for tougher times. Upgrade, a fintech that's led by LendingClub founder Renaud Laplanche, originated $8 billion in loans in 2024 and has 6.5 million customers. The company hasn't started to reduce how much it's lending to customers, but if 'tariffs are here to stay, and they negatively impact economic growth,' it will start to pull back, Laplanche says. If the economy deteriorates, he says Upgrade will try to continue growing by shifting its focus to 'lower-risk loans such as home improvement financing.'
One step he has already taken: Upgrade has started doing fewer auto loans for new, imported cars, since their prices are expected to rise due to the new tariffs. If new car prices go up, their value will fall farther after they're purchased, since they'll then have to compete with used cars that weren't subject to tariffs.
Figure, a fintech that extends home equity lines of credit (HELOCs) and facilitated more than $5 billion in loans last year, says it hasn't pulled back yet. CEO Michael Tannenbaum says the company is 'repricing our loans regularly' to correspond with market interest rates, though that hasn't yet led to a price increase for consumers.
For the publicly traded fintechs, research analysts disagree on whether this is a good time to buy their stocks. KBW's Switzer says, 'it might be too early to step in,' while Dolev thinks it's the right time to buy. While interest rates are largely expected to go down, which would help many lenders, interest rates spreads–the difference between what a financial institution earns on its deposits versus what it charges others to borrow from it–have risen sharply. That means non-bank fintechs like Affirm and Upstart could see their costs to fund their loans rise. And institutional lenders could get skittish, becoming less willing to lend to nonbanks, thus limiting fintechs' growth.
Bologna and Dolev think lenders will likely start reigning in their loans, and we'll get more visibility into that over the next three to four weeks, when they start to report their second quarter earnings. On those earning calls, analysts will probably ask them if they've pulled back already, and 'they'll have to answer,' Dolev says. They'll also likely be asked about any early indications on how consumers are faring so far, including what their spending patterns have looked like this month after the tariffs were announced.