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What will online lending be like in the post-COVID world?


Despite lingering quarantines, the world is slowly getting back to “normal life” and adapting everyday processes to new requirements. It is interesting to watch the course of events, because the crisis has opened up opportunities for innovation and learning, changing consumer behaviour. Business has focused on the digital transformation, with companies increasingly investing in cloud products, cashless payments gaining momentum and traditional retail stores rushing to establish a presence on the Internet.

The demands of social distancing have put fintech in the spotlight, because digital financial services can help complete everyday tasks quickly and safely under quarantine conditions. Thus, COVID-19 shed light on infrastructure deficiencies and low levels of digital literacy.

One positive result of this situation is the growth of non-cash payments. The reluctance to use cash, the inaccessibility of banking infrastructure and strict requirements imposed on borrowers by traditional financial institutions have increased the demand for non-bank loans, allowing this market segment to get through the beginning of the crisis more smoothly. The need to reduce the time it takes to manage finances, as well as the proliferation of smartphones, will drive market growth in the future. Even taking into account the coronavirus crisis, experts predict annual growth rates of 20% in the global digital lending market until 2025.

However, retaining customers during quarantine, when everyone is cutting costs, is not easy. Market leaders use complementary data to improve scoring and find the right personal touch for different audiences. Traditional credit scores are designed to serve people who have a history of using financial products. However, this metric excludes a number of potential clients who either do not have such a history or have an unstable income. These borrowers need loans and are able to fulfill obligations, but they cannot prove their solvency. The future lies in using diversified datasets to find new ways of attracting customers and providing better scoring. To this end, financial companies will forge partnerships with popular B2C companies that have access to user data.

It is important not only to acquire additional data, but also to learn how to work with it. Big data analysis is hard to imagine without artificial intelligence. By processing large amounts of information using machine learning, AI will help create the most popular product or service for each market segment, in addition to improving scoring. Industry leaders are actively investing in this technology, with AI algorithms studying the pages of borrowers on social networks and mobile operators offering their own scoring products by analysing subscribers.

In addition, AI is able to track macroeconomic trends and monitor borrowers’ finances, alerting lenders if problems arise with the loan or if the borrower is able to repay the debt ahead of schedule. This will make it possible to develop a proactive repayment plan.

The full digitisation of the loan life cycle will help finance companies to remain competitive in the 2020s, creating conditions for greater transparency and cost-effectiveness, while delivering the consumer experience borrowers expect. Borrowers, for their part, want full control over the process, so that they can submit an application or request a chat consultation at any time of the day, instantly find out the status of their request and take up the process of applying for a loan from where they left off and through the channel of their choosing.

Today, so much user data has been accumulated that the lending process can be automated with ease, meaning that the cost of the financial product can be reduced. Large companies that have already studied their customers are actively entering the financial services market: Amazon provides loans to small businesses, Apple has launched its own credit card and Facebook has put in place a payment system. More such projects will be revealed in the coming years.

For their part, consumers are becoming more demanding. COVID-19 taught them that digital technology can simplify everything from shopping online to video chats with colleagues. For this reason, they expect a lot from digital lending: an intuitive interface, the exclusion of irrelevant stages, the automatic filling-out of application fields, interactions being kept to a minimum, warnings about potential problems with loans and so on. Most consumers are also concerned about how the coronavirus will affect their credit rating, and therefore are interested in issues of financial literacy.

Banks and financial companies must remember that the consumer is not the cause of the crisis. Consolidation and fewer startups will lead to greater concentration in the sector, potentially slowing down inclusion. In this context, the task of digitalisation and the implementation of innovations is set to increase the availability of financial services, reduce their cost and enhance the security of personal data. The actions taken now to help the client will lay the groundwork for the future development of both the company and the ecosystem as a whole.

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