Moralized Classification and the Making of Fintech Credit

• In Event: Economic Sociology Section Roundtables
  In Refereed Roundtable (60 minute): Roundtable 6: Markets, Culture, and Moral economy

Abstract

Recent transformations in U.S. consumer credit markets have been driven by partnerships between fintech and technology firms and a small number of community banks, in which platforms control underwriting, pricing, and borrower acquisition while banks formally originate loans and retain regulatory responsibility. Prevailing accounts explain this model through technological efficiency or regulatory arbitrage, treating regulation as backdrop or constraint. I argue instead that the bank-tech partnership model emerged through post-2008 regulatory governance itself. Following the financial crisis, policymakers institutionalized a moralized classification regime that distinguished systemically risky large banks from socially valuable community banks, embedding asset-based supervisory tailoring into regulatory design. As charter acquisition proved politically contested and unstable, fintech firms scaled through partnerships anchored in protected community bank charters. These arrangements concentrated within a small subset of sponsor banks that function as infrastructural gateways between platform-based credit systems and the regulatory state. Drawing on rulemaking records, congressional discourse, industry filings, and evidence of sponsor-bank concentration, I show how moral deservingness shaped supervisory differentiation and structured where innovation could be incorporated within existing categories. The result is a classification paradox: institutions formally designated as small, relationship-based lenders increasingly operate as centralized origination hubs in national, platform-mediated credit markets. Because supervisory intensity remains tethered to asset size rather than functional control over credit allocation, regulatory responsibility and decision authority diverge. Rather than reflecting drift or deregulation, platform-mediated finance has been constituted through lawful governance processes that preserved protected institutional categories even as concentrated infrastructural power accumulated within them, reshaping systemic risk, market power, and consumer accountability from within the regulatory state.

Author

• Elizabeth Riley, University of California-San Diego