Across the world, lending industry in the last few years have gained momentum. Interest of FinTechs in the lending industry was responsible for stirring the momentum which was later on joined by traditional lenders. The result of stirring was change in consumer behavior, who were being wooed by the tech and internet giants.
With the augment of technology, these tech giants initiated the process of transforming the lending space. Availability of data played a crucial role here. Moreover, governments became more flexible and started to promote flexible regulatory environments for the companies to work on remarkable innovations.
Primarily it was the consumer research which brought some interesting insights to light and validated that the market is ripe to adopt digital lending. More than 50% borrowers across the world with access of internet applied for a loan digitally in the last one year.
What came to be an interesting study also was the fact that in the digital lending world, the behavior of the lenders as well as consumers were not driven by demographic factors like age and location. These days consumer journeys can be termed as ‘phygital’ (physical + digital) or in simple terms hybrid. Google and Bing as well as lending platforms are the most common places for consumer research. Borrowers as well as lenders on these platforms typically look for interest rates as well as eligibility. What needs to be noticed here is that the digital loan tickets which are generated are quickly going to reach the scale of physical loans.
Fintechs as well as banks are now treating small and medium enterprise lending as digital priority. The reason for this is cited with the fact that the: costs are high and opportunities to enhance customer experience are significant. The proposition here is that both fintechs as well as banks are aiming to gain grounds in the world of SME lending. The amount of time from processing to disbursement of loan has been significantly reduced – this has been a vital point when it comes to deciding upon a lender.
As of now most banks are work towards digitizing parts of their businesses as well as operations however, many are dissatisfied with the progress they are making. In Europe, the solution is being implemented with the introduction of PSD2. However, across the world loan disbursements is delayed for reasons such as lack of trust in automated systems, limited data access, lack of digital talent, and no co-operation between enterprises and risks.
These drawbacks have caused several banks to delay or be sidetracked from initiating the digitization efforts. Initiatives launched with excitement lose their way in between as soon as issues occur. As a result, the capital which is need to sustain the initiative is sometimes party or sometimes wholly withheld.