Germany is the EU country with the highest volume of consumer loans. German consumers borrowed approximately 123 billion euros in new and renegotiated loans last year. The next-highest volumes of consumer lending are typically recorded in France, Italy, and Spain, followed by Finland and Luxembourg.
One of the key drivers behind the massive adoption of consumer credit has been the rise of digital technologies. Today’s consumers can access a wide range of financial products and services through online platforms and mobile apps. This has made it easier than ever for individuals to apply for loans and credit. It has also opened up new opportunities for lenders to reach large audiences. In this article, we examine trends that lenders should strive to understand to stay ahead of the curve.
1. A Continuing Shift In A Growing Consumer Lending Market
The consumer lending industry has evolved significantly over recent years. A growing number of consumer loan providers offering a wide range of borrowing options to suit different needs and preferences. Traditionally, consumers would primarily rely on banks and credit unions to access loans and credit products.
However, in recent years, alternative consumer loan providers and online platforms have emerged as increasingly popular options. Market growth and technological development has led to an influx of alternative providers.
This year, we expect to see a continuation of consumers shifting to alternative providers and online platforms. And an increased need for loans due to the recession.
2. Blockchain-based Consumer Lending Product Development
In 2023, an increase of identity verification methods and the use of smart contracts based on blockchain is likely. At its core, blockchain is a distributed ledger that allows for secure, transparent, and decentralised record-keeping. This can be particularly useful in the lending industry, where the accuracy and security of financial transactions are critical.
One potential use of blockchain in consumer lending is in the area of identity verification. By leveraging blockchain’s immutable record-keeping capabilities, consumer loan providers can create a secure and tamper-proof system for verifying borrowers’ identities. This could help reduce fraud and improve the accuracy of credit assessments.
3. Rising Demand for Ethical and Responsible Consumer Lending
2023 will show a continuous rise in demand for ethical and responsible lending among consumers. More and more people are seeking out financial products and services that align with their values and social goals. Ethical and responsible lending refers to lending practices that prioritise transparency, fairness, and sustainability. They take into account the social and environmental impact of lending decisions. Public awareness of these issues are influencing their borrowing habits. As such, socially responsible, or ethical, investments have accelerated in popularity in recent years. The global sustainable investment market grew from around $800 billion in 2018 to nearly $4 trillion in 2021.
4. Improved Customer Experience In Consumer Lending
Consumer loan providers are continuously seeking to improve the customer experience by offering a range of services and features designed to make the borrowing process faster, easier, and more convenient for customers.
Further improvement of customer experiences are underway to accommodate the influx of tech-savvy Millennials and Gen-Z consumers into the financial markets. These young consumers have brought a fundamental shift in consumer ideologies and behaviours with their digital-first mentality and desire for instant gratification.
5. More Automated Document Verification
Traditionally, loan providers would manually review documents such as pay slips, bank statements, and tax returns, which could be a time-consuming and error-prone process. In 2023 we will see a trend that is the increased use of automated document verification. This will undoubtedly improve the efficiency and accuracy of the loan application process.
6. AI and Machine Learning Will Create Opportunities In 2023
Personalising consumer loans with artificial intelligence and machine learning involves using data and algorithms to create tailored loan products for individual borrowers. 2023 will show further adoption of data analysis tools to review a borrower’s financial history, credit score, employment history, and other relevant data to determine creditworthiness and assess their ability to repay the loan. Loan providers are also going to find new applications to use AI, for example in customer chat bots, and machine learning to assess the risk of default or delinquency for each borrower, allowing consumer lending to be flexible with loan providers adjusting loan terms and interest rates accordingly.
7. Fraud Reduction With Instant Payouts and Biometrics
Instant payouts and biometrics are two technologies that can help reduce fraud in consumer lending:
Instant Payouts: With instant payouts, consumer loan providers can reduce the risk of fraud by, in one single process, verify the identity of the borrower and transfer funds directly to their bank account in real-time. This reduces the window of opportunity for fraudsters to use fake identities or fraudulent information.
Biometrics: Fingerprint scanners or facial recognition software–like those found in many smartphones–can be used for consumer lending. They can authenticate a borrower’s identity during the application process. By requiring borrowers to provide biometric data, consumer loan providers can ensure that the person applying for the loan is who they claim to be.
How Brite Supports The Consumer Lending sector
Understanding trends like these will help consumer loan providers develop products and services that meet the evolving needs of their customers. By offering innovative loan products and services that appeal to today’s customers, loan providers can differentiate themselves from their competitors in the consumer lending industry.
Brite supports the consumer loans sector with Instant Payouts available across the EU. Use them to reduce fraud, grow customer satisfaction and loyalty with the ability to transfer funds as soon as the loan amount is approved.
Want to explore how instant payments can boost customer loyalty within consumer lending? Let’s talk!