The face of the lending industry has changed over the decades. Technological evolution has transformed many processes within the lending industry. Most of these developments have occurred to meet the changing needs of borrowers. New-age customers want more from lending institutions, especially Gen Z customers.
To maintain business continuity, lending institutions are bound to follow the changing demands of customers. Since the lending industry has adapted to changing customer needs, it is continuously growing. As per reports, the market size of the worldwide lending industry will be more than USD 11,000 billion in 2030. Read on to understand the emerging trends in lending that have helped adapt to changing borrower needs.
The rise of digitisation for lending processes
Multiple processes are involved within the lending industry, from loan origination to credit analysis. A few decades back, several processes within the lending industry were completed manually. Back then, the technologies within the lending industry had limited scope.
For the same rationale, there was an increased manual burden on loan processors, credit analysts, and other professionals within the lending industry. As of now, lending institutions have undergone digitisation to automate several processes. With the help of technology, loan processing, credit evaluation, risk analysis, fraud detection, and other processes have been automated within the lending industry.
The rise of digital platforms for lending
Gone are the days when customers were willing to visit physical offices with documents to secure loans. Offline loans are no more an obligation for borrowers in 2023. With the rise of digital lending platforms, one can apply for a loan without moving an inch. The demand for digital loans with less paperwork has significantly increased among customers, especially among Gen Z borrowers. With the help of digital lending platforms, borrowers can fill out loan applications, upload loan documents, and check loan approval status online. Since everything is done without moving an inch, customer satisfaction levels increase.
The rise of chatbots and virtual assistants
Customers can apply for loans via personalised websites and mobile applications. However, they might face some issues while browsing lending products online. Some borrowers might want to collect information before applying for online loans. To help such customers, lending institutions have embedded chatbots and virtual assistants within their digital lending platforms.
Customers can get answers to basic queries via a chatbot or virtual assistants. They don’t have to connect with customer support representatives for common lending queries. Customers support representatives can be reserved for complex queries from borrowers. Chatbots are not recent trends in lending, as they have been around since the 2010s. However, chatbots have become more advanced with the use of AI in the past few years.
The rise of AI and ML within the lending industry
New-age technologies are taking the lending industry to the next level. When discussing the trends in lending, you cannot ignore the role of Artificial Intelligence and Machine Learning. These technologies have helped lenders automate several processes and boost customer satisfaction. Some ways how AI and ML have helped lenders adapt to changing customer needs are as follows:
- AI/ML are helping lenders with risk assessment. AI/ML models can easily identify the risks associated with a borrower. Since the risk assessment process has been simplified, lenders can approve loan applications quickly.
- Loan processors spend most of their time on underwriting, credit scoring, and other tasks. Since the turnaround time is high, borrowers wait for loan approval. With the use of AI/ML, most loan processing tasks have been automated, thus speeding the loan approval process.
- AI/ML are helping lenders identify the preferences of their customers. Based on customer interests, lenders are launching personalised financial products.
- AI/ML has a crucial role within the customer support sector in the lending industry. These technologies have made customer support available 24*7 for borrowers.
The rise of P2P lending
Many financial institutions have developed P2P lending platforms for customers. A P2P (Peer-to-Peer) lending platform will allow borrowers to find individual lenders without the need for middlemen. P2P platforms allow individuals an earning option, as they can fund loans and earn interest at regular intervals. In the coming years, P2P platforms will grow with more lenders and borrowers using them.
The rise of small loans
Not everyone might have a credit history. However, it does not mean one cannot get a small loan to meet an urgent financial obligation. In recent years, many lending applications have started offering small loans to borrowers with no or little credit history. Also, small loans are processed in quick succession, thus helping borrowers meet urgent financial obligations.
In a nutshell
The recent trends in lending have improved the customer experience. Borrowers no longer visit physical offices to get loans, as everything is now online. Also, new-age technologies like AI, ML, and blockchain have helped lending institutions meet customer demands. Keep track of recent innovations within the lending industry!
Ellen Holington