Current Trends in Lending: A Comprehensive Overview
The lending industry has gone through several changes in the past few years. With the rise of new-age technologies, there has been a paradigm shift in the lending industry. These technologies broadened the horizon of the global lending industry. The international lending industry was already worth over USD 6,800 billion in 2019.
By the end of 2025 and 2030, it will be worth more than USD 8,800 and USD 11,600 billion, respectively. The recent trends in the lending industry have also increased the convenience for borrowers. Read on to understand more about trends in lending in detail.
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End-to-end digitisation for lending processes
End-to-end digitisation is transforming the entire workflow with the help of technologies. As per the recent trends, more lenders are transforming their business processes with the help of technology. Lenders can optimise their workflow and enhance digital customer experience with end-to-end digitisation. Borrowers can apply for loans online, and lenders can analyse applications digitally with end-to-end digitisation. Even though digitisation has arrived in the lending industry, there is still a long way to go. As per Accenture, around 50% of banking tasks are still manual. In the coming years, more and more lending tasks will be digitised to improve productivity.
Increased use of credit scoring models
Lenders evaluate credit scores before offering funds to an individual or a company. The credit score of an individual or organisation will determine the creditworthiness. Lenders cannot provide funds to someone with a poor credit score, as the chances of default are high. Lenders have said goodbye to traditional credit scoring methods. In 2023, lenders rely on credit scoring models that reduce manual labour. There is no need to go through a pile of documents and complex calculations to calculate the credit score. An automated credit scoring model will evaluate the credit scores of multiple customers in quick succession.
The rise of Fintech lending
Gone are the days when only traditional banks offered loans to corporations and individuals. The rise of Fintech players has made loans more accessible, especially for individuals. Individuals acquire small-scale loans without even visiting a physical office. The cumbersome lending process of traditional banks has been replaced with fast-paced digital loans. Seeing the success of Fintech firms, traditional banks have also started offering digital loans. There is no paperwork with digital loans, as all the documents are uploaded online. Fintech firms will continue to grow due to their personalised financial services. As per stats, the global Fintech market will continue to grow with a CAGR of 27.4% till 2030.
Increased partnerships, collaborations, and third-party integrations
All recent trends in lending aren’t related to digitisation only. One of them is the increased partnerships between banks, Fintech firms, and non-banking institutions. More and more financial organisations are partnering with each other for data sharing, improved operations, and increased market reach. Besides increased partnerships and collaborations, third-party integrations on digital platforms have also increased. For example, Fintech apps do more than facilitate money transfers and lend funds. Nowadays, Fintech apps have third-party integrations allowing customers to access different lending products. These third-party integrations have been possible due to increased partnerships between different financial institutions.
The rise of self-service
The recent trends in lending have increased the convenience for borrowers. One of the trends is the rise of self-service within the lending industry. Customers do not have to search for representatives to apply for a loan. They can apply for loans via digital platforms without any external help. Digital lending platforms have now started offering chatbots to assist customers at any step. With the help of self-service options, lending institutions can reduce the manual burden on their employees.
The use of AI and ML
Lending institutions are increasingly using AI (Artificial Intelligence) and ML (Machine Learning) for different processes. Usually, AI/ML is used for back-end lending processes like fraud detection, risk analysis, credit scoring, and loan application generation. AI/ML technologies also help lending institutions induce automation within their operations. AI/ML can reduce the chances of human errors within the lending industry. For example, loan processors might approve a loan for a borrower with high credit risk. AI/ML can prevent these common mistakes and help lending institutions avoid risks.
The use of blockchain
A few years back, blockchain was only used within the cryptocurrency sector. In the past few years, blockchain has been used in the Fintech sector. Many financial products are now using blockchain technology, including lending products. With the help of blockchain, lenders now have access to real-time transaction data. Also, blockchain is helping lending institutions boost security.
In a nutshell
The lending industry has undergone many changes, primarily due to the rise of technology. Besides helping lending institutions, the recent trends have also increased the customer satisfaction level. Learn more about the trends in lending!
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