With new tech, increasingly stringent regulation and comprehensive affordability assessments becoming feasible, consumer lending has developed and changed extensively through the era of digital banking.
The biggest catalyst for change across the last two decades has been the smartphone. Mobile banking has effectively democratised banking while laying the groundwork for bigger and better technology allowing for unprecedented levels of convenience and access.
This has had several impacts when it comes to consumer lending, from increased consumer debt to new tech industries springing up around it.
Consumers Are No Longer Branch Dependent
Online banking and fintech development have been pivotal in consumer lending over the last decade, with access to financial services never easier. This has changed the way people access financial services, allowing a steady increase in consumer lending applications online.
Nearly five million UK consumers have entered 2020 with debts totalling over £10,000. With personal loans surging world-wide, fintech and online banking services have had a huge impact, making up 38% of the personal loan market. The accessibility of online application is playing a big role in this increase in overall debt.
Overall, however, the surge of online banking and fintech, in general, has been hugely positive for more rural populations and developing economies.
By enabling more people than ever to open a bank account, financial inclusion has never been more practical for big tradition banks and online-only start-ups. This is vital for the growth of rural local economies, with online banking finally untethering financial services from actual physical branches.
AI-Powered Data Crunching and Customer Centrism
One of the biggest developments across the last decade is machine learning and AI-powered technology. The ability to crunch vast amounts of data effectively, carefully and creatively opens a whole world of possibilities when it comes to consumer centrism, service personalisation, as well as consumer lending and debt management.
Far from the traditionally dry, confusing and distant banking services of years gone by, through digital online banking and personalisation, consumers will increasingly be able to be more aware of their finances with fewer roadblocks when it comes to jargon and dependence on experts.
Effectively, technology like this democratises banking, making it more available than ever and simplifying the overall experience. In addition, AI and machine learning will help to offer a consumer-centric experience that prioritises the individual’s needs, whether those needs lie in debt management or lending.
Despite increasing ease of access to financial service, with the elimination of many challenges and roadblocks, increasingly stringent lending regulations and more comprehensive affordability assessments have been allowing for more responsible consumer lending.
Working specially to curtail the reach of payday lending services, lending regulations in the UK have tightened up, effectively protecting consumers and limiting lenders.
While technology in the affordability assessment space has not changed all that much over the last decade, that looks set to change going forward with massive investment in technology by independent services, banks and lenders.
What Does the Future Hold for Consumer Lending?
If the continuing rate of developing technology is anything to go by, we’re going to see much more in the next decade. With the global fintech market increasing to $111.8 billion (£86.3 billion) in 2018, the development of new banking tech doesn’t look set to slow down any time soon.