Digital lending in Colombia: fintechs, delinquency and decision engines

Fintechs gain ground, banks pull back

Most consumers still go to traditional banks, between 74% and 79%. Fintechs hold steady at around 16%. To read the trend cleanly, TransUnion pulls Nubank out of the fintech group and counts it as financial sector, because its size distorts everything else.

The interesting part is the flow, not the snapshot. While the financial and cooperative sector originated 20% less new credit over the year, fintechs grew 11%, filling the space banks left behind.

A market tied to short-term personal loans

Fintech growth rests almost entirely on one product: the short-term personal loan, which already accounts for 94% of their new originations. Fintech share of that product jumped from 12% in 2021 to nearly 30% today.

And they started reaching for bigger amounts. In short-term loans, the 500,000 to 1.5 million peso band went from 14% to 21%. Traditional banks are moving the other way, lowering amounts to compete for those users.

The profile: the riskiest segments get included

Fintechs mostly serve the hardest segments: under 30, lower income, people new to credit with less than two years of history, and below-prime profiles with a score under 600. In fintech personal loans, the subprime segment went from 34% in 2021 to 43% in 2024.

On top of that, nearly 6 in 10 fintech users also hold credit with a bank, and many are stretched: they put up to 45% of monthly income toward installments. The system as a whole is tense. Over the past year, 38% of consumers saw their score worsen and only 27% improved it.

Delinquency and vintages: the signal is in how it was originated

The deterioration indicators are mixed. In banking, the hardest-hit product is microcredit, with delinquency up almost 300 basis points over the year. In fintechs, delinquency on short-term personal loans doubled.

There is an important nuance in roll rates, which measure the share of accounts moving from current into delinquency. Fintech short-term loans roll faster into early delinquency, yet in payroll loans fintechs come out better than banks on advanced delinquency, 20% against 46%.

The most telling picture is in the vintages. Traditional bank originations from 2023 on are deteriorating more than earlier years; fintech ones, by contrast, are improving. The report gives two reasons: they did not overgrow between 2021 and 2022, and they are originating with better processes and better tools.

Technology is what separates the vintages

Here is the point that matters for a lender. Keeping rigid legacy systems delays product launches and makes changing a risk policy take months, with high costs and little room to react.

Lulo Bank is a good example of the other path. Moving to a modern decision engine with uFlow, it left behind a model with over 300 variables and a 700-branch tree. Policy changes dropped from months to weeks or hours, processing grew almost 300%, and approval rose by up to 12 points.

For very large institutions, where touching the core is almost impossible, the market recommends "speedboats": setting up units or small parallel companies with new, agile technology instead of fighting the old structure. And the underlying trend is to drop the rigid portfolio and build personalized approval flows, with alternative data, that adapt to each applicant.

What to watch if you lend in Colombia

The lesson from the vintages is clear: the edge is not in growing faster, but in originating better. And that translates into concrete things. Orchestrate data to see the whole customer, test every new policy on 1 or 2% of the portfolio before releasing it, and move limits with payment evidence instead of a fixed portfolio.

Above all, govern risk with traceability. In a market that is tightening, being able to explain and reverse a decision is worth as much as making it fast.