By Stephen Pool, VP of Partnerships at Finturf and Co-Founder of Safeturf
For fifteen years, consumer lending ran on cheap money. Capital was abundant, funding was nearly free, and you could hide a lot of sloppy underwriting behind sheer volume. That era is over, and I don’t think it’s coming back on the timeline most founders are quietly hoping for.
As of the middle of 2026, the Federal Reserve has parked its benchmark rate in the 3.50 to 3.75 percent range, with its own projections pointing to rates staying there or drifting higher into next year. Consumers are stretched, funding is expensive, and the spread every lender lives on is getting squeezed from both ends. This is not a storm to wait out. It’s the climate now.
For nearly two decades, I’ve built consumer lending products through exactly these kinds of cycles, including more than six point-of-sale lending products launched in the last ten years alone. I’ve led the design of loan origination systems purpose-built for point-of-sale lending. Watch enough businesses win and lose across enough rate environments, and you form a strong opinion about what actually separates them. It is not the thing most people think.
Everyone is optimizing the same borrower
If you ask a room full of fintech founders how they plan to compete in a high-rate environment, you’ll hear the same answers. Better underwriting models. More alternative data. Faster decisions. Tighter credit boxes. Cheaper capital. All of it real, all of it necessary, and all of it aimed at one question: Will this borrower pay us back?
It’s the question every serious lender is already pouring its best engineers and biggest budgets into. When the whole field optimizes the same slice of the problem, the edge you squeeze out of a slightly better credit model is thin, and it thins further every quarter. The real advantage lies somewhere most of the market has stopped looking.
First, a distinction that matters. I’m not talking about direct-to-consumer loans, the product a borrower applies for online. I’m talking about point-of-sale financing: credit extended for a product sold through a merchant or installed by a third party. A roof, an HVAC system, a medical procedure. Not every lender does this. The ones that do have something the direct lenders don’t: an extra set of levers to optimize the performance of their assets. They also carry an additional risk associated with those levers.
In point-of-sale lending, there’s a third party standing between you and the borrower, and that party shapes the quality of every loan you book. In home improvement, the contractor isn’t a bystander to the credit transaction. The contractor facilitates it. They’re the one in the customer’s living room, presenting the financing, scoping the project, and often controlling both the paperwork and the flow of money. When that contractor is careless or flat-out dishonest, the damage doesn’t stay with them. It lands on the lender in the form of disputes, chargebacks, buybacks, regulatory complaints, and loans that were misrepresented from the moment they were signed. No borrower-side credit model catches it. The homeowner who financed a roof that leaks or wasn’t installed doesn’t pay, and their 740 FICO score never saw it coming, because the borrower was never the problem.
The majority of lenders operating in this space still underweight that risk. They know it’s there. They just throw bodies at it through deploying manual processes and hoping to catch the bad actors before the losses land. A lot of lenders will approve a contractor once and rarely look again, not noticing as licenses lapse, complaints pile up, or the business quietly changes hands.
This is where the structure of the market matters. Between the merchant and the lenders sits a connective layer that routes applications to a tiered network of financing options in real time. This is what the industry calls waterfall financing. An application one lender declines cascades to the next one willing to take on that risk at that price. It’s a resilient way to keep credit flowing when conditions tighten, because the network keeps approving even as individual lenders adjust their appetites with the cycle.
But a network is only as trustworthy as its weakest contractor. So we made a decision most of the market avoids: Run real due diligence on every dealer ourselves, as a second layer of defense, so we only send the best contractors into our lending network. For the first two years, we did it entirely by hand. Most lenders in the space operate by pulling data from a few aggregators, conducting due diligence manually, and making a call on whether to work with the dealer. Because it’s manual, ongoing monitoring is nearly impossible. You vet a contractor once and then, functionally, you’re blind.
The fix isn’t complicated in principle, only in discipline. Instead of leaning on one large data source and trusting it, triangulate the picture of a contractor across many so the assessment is corroborated rather than taken on faith and, critically, monitored continuously instead of frozen at the moment of onboarding. The other half is shared intelligence. Give lenders a way to see one another’s actions, so that when one removes a dealer, the whole network sees it and can react. A contractor can’t simply hop from one lender to the next, causing the same consumer harm again and again.
Discipline is the growth strategy now
There’s a broader principle underlying all of this, and it runs counter to the instinct many founders still have. Risk discipline is not the brake on growth. In this environment, it is the growth strategy. Your capital partners are underwriting you as much as you’re underwriting your borrowers. When money is tight, they fund the lender whose portfolios perform, whose reporting is clean, and whose compliance doesn’t keep them up at night. Every point of loss you avoid is a point of confidence you build with the people whose capital you need to scale.
The counterexample is playing out live in buy now, pay later, where volume has grown roughly 20 percent a year while late-payment rates have climbed toward 40 percent and a majority of borrowers sit in subprime territory. Impressive growth, deteriorating credit. That divergence exists because origination got prioritized over portfolio health. In a cheap-money world, you could paper over that gap. Not anymore.
The high-rate era is sorting lending businesses into two groups. One is still trying to grow out of thin margins by chasing volume and optimizing the same borrower-side models as everyone else. The other has accepted that when capital is expensive and competition is fierce, the edge lives where the market has stopped looking: in structural resilience, in real credit discipline, and in the overlooked risk sitting on the merchant side of every point-of-sale deal. I know which group I’d bet on. It’s the one that internalized the oldest lesson in this business: The risk you stop watching is the one that finally gets you.
Stephen Pool is VP of Partnerships at Finturf, a point-of-sale financing platform and co-founder of SafeTurf, its third-party due diligence and risk monitoring product. With nearly two decades in consumer finance, he has helped bring seven lending products to market, spanning everything from consumer loans to equipment leases with partners like Johnson Controls. Earlier in his career he built the compliance program at CoreLogic Credco in response to new CFPB regulations, then launched Benji Financing and overhauled contractor risk management at Renovate America. Today, his focus is on point-of-sale lending, credit and third-party risk, and building lending products that perform through the cycle.
