2020 was a tumultuous year for the world with the rise of coronavirus, but also economically, politically, and culturally.
This has extended into 2021 and does not seem to be slowing down any time soon. There was a fundamental shift across all industries, but the world of lending was significantly disrupted and alternative lenders rose, which has left traditional creditors wondering about the future of loans. Here are a few of our predictions about the future of lending:
Applicants Will Favour Alternatives To Payday Loans
Payday loans or emergency loans are typically take out to cover an unexpected cash flow issue or financial situation. However, these loans tend to be more expensive for borrowers, and so applicants are becoming more aware of the alternative options. Payday loans will not be regulated out of existence, but instead, people will favour innovative products that meet the same needs at a much lower cost. There is a growing awareness of the other credit options available, so while payday loans will still be on the market, they may become less popular.
Banks Will Exit The Mortgage Battles
Traditional banks are already losing out to non-bank lenders in the battle of mortgage loans. We predict that this trend will only accelerate into the future and leave banks exiting the competition all together. Thanks to new technologies, conforming loans are now so simple to make that online lenders have been able to outcompete banks on speed of approval. While banks have been the more trusted lender for mortgages in the past, the ease and speed of the online lenders has been hard for applicants to ignore.
The Introduction Of AI Monitoring For Loans
One area that is overdue some innovation is loan monitoring and maintaining a balance. For example, for small businesses, personal contact with a bank goes a long way to preventing defaults and missed repayments. With a specially designed AI tool, lenders could watch the macroeconomic trends and monitor a borrower’s finances. This could alert the lender when the loan is heading for trouble and give a warning that the borrower may not be able to meet repayments. That crucial advance warning can provide lenders with the opportunity to reach out and work on a proactive plan. It is one technological advancement that could help to cut down the time spent on monitoring and could be used across a variety of lenders.
Non-Banks Will Continue To Expand Into All Forms Of Lending
There has been a huge shift in non-banks adapting to offer lending, such as Amazon offering loans to small businesses and Apple launching a credit card. Each of these financial products are outgrowths of the companies’ core businesses and concepts, furthering their customers’ opportunities to accomplish their goals. Big businesses with access to the best and latest tech tools will have the ability to break into the world of lending, using their customer data to offer convenient options.
While the world of lending has sifted a little, the future of loans definitely is not in danger. However, with the rising technologies and loan alternatives, there may be some interesting new trends up ahead.