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CMA Final · Entrepreneurship and Startup · Types of New Age Business

Which statement best describes a fintech startup operating a digital lending platform that partners with regulated lenders rather than lending from its own balance sheet?

The fintech acts as a technology and origination intermediary, so credit risk mainly sits with the regulated lending partner, unless the platform agrees to share first-loss guarantees. It is still subject to regulation and cannot freely accept public deposits.

  1. AIt acts as a technology and origination intermediary, so credit risk largely rests with the regulated partner unless it shares first-loss guaranteesCorrect
  2. BIt bears all credit risk because it markets the loans
  3. CIt is exempt from all data privacy and regulatory norms
  4. DIt can accept public deposits freely as a platform

Explanation

In a partnership model the platform sources and processes borrowers while the regulated entity funds the loan and holds the credit risk, subject to any agreed first-loss arrangement. Marketing a loan does not by itself transfer risk, platforms are not exempt from regulation, and accepting public deposits is restricted to authorised entities.

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