Demand, Data and User Experience Responsible for Sharp Growth in Consumer Lending, Says Equiniti Report

fintechA recent European research report on key trends in consumer attitudes to digital lending, found that 62% of consumers are likely to look at alternative digital lenders when searching for loan options, an increase of 15% from 2017.

The report suggests a three-pronged answer to this growth, including:
– an increased demand for consumer credit as a result of changing attitudes towards both lenders themselves and credit application management processes;
– consumers are less reluctant to share their financial information to get the best deal coupled with impacts of directives such as Open Banking and the Second Payments Services Directive (PSD2) in Europe; and
– the improvements made to customer experiences especially with a focus on mobile applications.

It’s the 6th annual report and explores the key trends in consumer attitudes to digital lending, while also highlighting opportunities for both consumers as well as digital lenders in the space. It showed that consumer confidence in the credit market has continued to grow. Over a quarter of consumers who have taken out a loan in the last twelve months, have used an alternative lender.

“Customers are being exposed to, and increasingly expecting, unparalleled speed and convenience from their financial service providers, and are demanding products and services that can be delivered anytime, anywhere, instantly and on their terms. Alternate financial services providers have been the first to respond to these need,said Oleg Boyko, investor, Founder of Finstar Financial Group.

Boyko`s Finstar, an international private equity firm which manages and consults portfolio companies and assets in Europe, the US, Asia, Latin America and the CIS, has gained significant expertise in technology-based, data-driven Fintech innovation in alternative financial services and complex markets through the large number of international companies that they oversee and consult with.

The report also showed that as many as 60% of respondents were likely to continue with a slightly higher interest alternative, if offered at the point when a loan application was declined. The market for instant follow up of declined applications remains largely unoccupied, and presents a significant revenue opportunity for lenders that get the balance right.

The global digital lending platform market size is expected to grow from USD 5.1 billion in 2018 to USD 12.1 billion by 2023. Other industry players, like Brian D’Arcy, founder of digital lending platform Luna Connect, believe they know why.

There is currently a lack of quality data available about borrowers. This leaves lenders relying on slow, expensive paper-based processes to reach a credit decision. Borrowers then get frustrated because they expect the same efficiencies they get from digital services in other parts of their lives.” said D’Arcy. Luna Connect is a digital lending platform primarily aimed at SMEs.

Sarah Jackson, Sales Director of Equiniti Credit Services said, “As the lending industry enters a new era of digital customer-centricity, credit providers will need to adapt to the changing market to make the most of new opportunities. The report shows that lenders stand to gain significantly through the provision of value-added services and reveals how they can best leverage smart, automated origination and management processes to differentiate themselves through customer retention and user experience.

The report concluded that it is finding the “harmony” in a number of unique factors that will champion the growth in the consumer lending market, including consumer demand, data, user experience, customer service provision, web and app facilities, product flexibility, and value-adds such as wider lifestyle support services.

Oleg Boyko from Finstar confirmed that a confluence of forces, including changes in consumer behaviour, advances in cloud-based technology, the growing power and availability of mobile devices, and the emergence of data science, are opening up new whitespace for emerging players, and challenging traditional institutions as never before. These forces are coalescing to create new opportunities to serve the underserved.

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