Acceleration of Digital lending & how it’s changing globally

Rise in the adoption of AI, machine learning, and blockchain- based digital lending platforms and solutions will provide growth opportunities for the market during the forecast period.

There is more data generated in the world over the last five years than what was ever consumed in human history. One of the industries that is rapidly transforming itself is the finance industry, especially digital lending. According to Markets and Markets the global digital lending market is pegged to hit $20.3 billion by 2026, this is virtually doubling the total market opportunity as of 2021. 

The real reason for the doubling of the opportunity is the rise in the number of fintech startups and lending institutions going through digital transformation. What is digital transformation? Digital transformation is not just technology readiness to capture data digitally, it is value creation with the use of data at scale, it does not involve, or minimal, physical interventions to deliver services. 

Why does this matter to Lending Institutions?

Customers are the answer to all this, everyone has smart phones and they are going online to open accounts and to apply for loans. 

A lending institution has to make credit options available in three clicks. Today, lending institutions take five days to process things & it’s just not done in a world of Netflix, Prime & Doordash. 

The COVID-19 just accelerated the need for lending to go digital. Banks and other lending institutions were semi-prepared for this mammoth shift in business. 

Digital lending begins when the entire credit application is automated, which means the borrowing & the disbursement process is digital. 

You may be surprised to hear that lending institutions have just started on their journey towards building automated platforms. This market opportunity, reiterating the numbers again, is $20 billion. Most of the consumer or B2C led fintechs believe they have solved digital lending. But, scale can only be achieved if they become banks by themselves, which many of them are not at this point of time. 

So, what is an automated platform? A digital lending platform includes digital loan application, document capture, electronic signatures, credit analysis, loan pricing, loan decisions, and loan administration.

Now, once the above is done, all the data generated allows for accounting and reporting on cloud based dashboards. 

The next steps of digital transformation: physical to virtual cards & why banks need to work like fintech with the changing behaviour of the customer base

A businessman paying with credit card online making orders via Internet. Successful black male holding plastic card making transaction using mobile banking application

A new survey commissioned by CardRatings and conducted among more than 2,000 adults online by Harris Poll finds that there is a debt-wary generation that is possibly also debt-weary thanks to record student loan burdens in the USA. 

The survey found millennials, in the USA, 18- to 34-year olds, are using credit cards quite differently than older generations. They are more likely than older adults to believe they have thin credit files, and millennials who do have a personal credit card are significantly less likely than those 35 and older to have a rewards credit card (72 percent vs. 87 percent).

A couple of things are happening, they may not need a physical card and banks need to understand the following. 

Fewer credit cards: The millennial generation is less likely to have a personal credit card when compared to the older adult population. While just 14 percent of adults ages 35-plus don’t have personal credit cards, that number rises to 29 percent when zeroing in on those who are 18-34 years old.

Thinner credit profiles: Millennials are more likely than their older counterparts to describe their credit score as “limited/no credit history/score.” The survey shows 14 percent of 18- to 34-year-olds describe their credit profile this way, while only 2 percent of adults ages 35 and older say the same.

Nonetheless the millennials and GenZs need credit cards or virtual credit cards that are personalised for

  • Homebuying: A good credit file will bring you various loan options. 
  • Funding their Small Business: since they have good credit they can be funded. 
  • Savings or loyalty points from retail as rewards: There is a small loss of potential income based on foregoing the free rewards (cash back, travel miles) that come by using cards for everyday spending and avoiding interest charges by paying in full each month.
  • Cars: Solid credit is a must in order to finance a car at the best rates. Considering that a vehicle is the classic “depreciating asset” (worth less after purchase) any rise in the cost of financing matters to the bottom line.

While traditional lending can handle these slowly, the millennials are going to those who can access their credit at a rapid pace. 

At givfin we enable you to go through digital transformation quickly. Don’t let consumer behaviour or technology hold you back. Stay relevant, go givfin.