Posted On: AUG-2023 | Categories : Information and Communication Technology
Digital mortgages and lending have become well-known ideas in the Internet banking space. With the emergence of new banking demands in recent years, the financial sector has undergone fast digitization.
In 2021, the market for digital lending platforms was USD 5.84 billion, and it will reach USD 47.85 billion by 2030, at a 25.97% CAGR during 2021-2030.
Digital lending is one of the fastest-growing fintech industries in India. It has grown from USD 9 billion in 2012 to USD 150 billion in 2020. By 2023, the market for digital loans will be worth about 350 billion dollars.
Traditional loan processing methods are quickly being replaced by digital mortgage because it offers a complete experience for lenders and borrowers. Lenders progressively use contemporary digital mortgage tactics for lead generation, auditing, targeted marketing, and loan closure.
According to the Federal Deposit Insurance Corporation's (FDIC) 2021 National Survey, there were an estimated 4.5 percent of unbanked American households (or roughly 5.9 million) and an estimated 14.1 percent of underbanked American households (or roughly 18.7 million) in 2021. Approximately 26 million people, whom the Consumer Financial Protection Bureau (CFPB) refers to as being "credit invisible," are at risk of being completely shut out of access to the most basic financial services because they lack a credit history and score, according to a survey performed by the CFPB. Even consumers who are underbanked yet have access to bank accounts frequently have trouble getting loans and other financial services.
Technological Advancements
Artificial intelligence & machine learning (ML) algorithm advancements have made it simpler to evaluate borrowers' creditworthiness. In order to make better loan judgments, these algorithms can analyze huge amounts of data, including financial documents and social media profiles.
Customer Changing Behaviour
The increasing convenience provided by technology is another boosting market expansion. People are more willing to use digital lending platforms to apply for loans now that they are more accustomed to using modern technology in their daily lives.
Additionally, easier access to information enables consumers to evaluate and investigate various loan options faster, raising their awareness of and expectations for lending products.
Following are the primary alternative digital lending channel trends and advantages they provide to customers:
Buy now, pay later
The "buy-now-pay-later" enables breaking payments into equal installments over time, and it is the most widely used and favored type of digital lending worldwide. This type of loan is interest free as long as the consumer makes complete payments on schedule.
Additionally, BNPLs are simpler to obtain than credit cards because the majority of BNPL suppliers do not want a credit score.
The market for BNPL in 2021 was USD 15.92 Bn, and by 2029, it will reach USD 90.51 Bn, growing at a 21.7% CAGR. The popularity of BNPL as a preferred alternative lending channel is driven by the quickly expanding digital lending trends as more and more consumers benefit from online buying.
North America is the leading region in terms of BNPL.
Peer to peer lending
Peer to peer lending is an alternative financing platform that lets people and businesses borrow and lend money to one another without going through a bank or other lending organization.
The general operational expenses of P2P lending platforms are lower than those of traditional credit institutions, allowing them to provide favorable conditions to borrowers and lenders. Lenders earn lucrative returns while borrowers benefit from easier access to financing, lower interest rates, and an easier procedure overall.
P2P is the fastest growing financial industry segment. The market for P2P lending was USD 83.79 billion in 2021, and it will be worth USD 705.81 billion by 2030, growing at a 26.7% CAGR. In 2021, North America was the largest market for P2P lending.
Blockchain-based digital lending Platforms
The market for blockchain-based digital lending systems (crypto lending) is rapidly expanding. It functions similarly to peer-to-peer lending, where borrowers and lenders are connected through a cryptocurrency lending platform, and Bitcoin is used as the medium of exchange rather than fiat money.
The act of lending cryptocurrency in exchange for recurring interest payments is referred to as crypto lending. The interest is often paid in Bitcoin, deposited, and compounded daily, weekly, or monthly. Decentralized and centralized platforms for crypto financing are the two main categories.
Transforming Digital Lending Landscape: The AI-Driven Paradigm Shift
Digital lending platforms rely heavily on AI and ML to improve credit risk assessment through enhanced data analysis. AI and ML are used by digital lending platforms to analyze data, detect fraud, and target good clients for cross-selling.
The profit potential of companies could increase by 38% by 2035 across 16 industries thanks to artificial intelligence (AI).
Traditional lenders traditionally evaluated creditworthiness using a prospective borrower's financial information. With the development of technology like AI models, lenders can now assess creditworthiness with better precision by using a range of data, including customer digital behavior, digital payment data, social media profiles, and a host of other data points. Credit managers can now make more informed decisions using AI models that can quickly process large amounts of unstructured & structured data from various sources in real-time.
Mapping The Pathways of Digital Lending Market: In-Depth Segment Overview
The business process management segment was the biggest market in terms of solution.
In 2022, business process management was the largest market, with a revenue share of 30%. Business process management is gaining popularity for reducing operational costs and increasing productivity.
The design and implementation segment led the market in terms of service.
In 2022, the design & implementation segment was the biggest market. The design and implementation service providers will handle the expanding demand for reliable and validated digital asset management procedures. Automation of services related to the design and execution of digital lending platforms will be made possible by technological breakthroughs and the quick uptake of artificial intelligence (AI).
The on-premise segment led the market with significant revenue share in terms of deployment.
The on-premise segment led the market with the largest share of nearly 68% in 2022. In an effort to eliminate cyber risks in light of the increasing frequency of data breaches and cyberattacks, financial institutions are choosing on-premise digital lending platforms.
On the other hand, cloud-based digital lending is gaining popularity. Cloud-based digital lending services will proliferate due to increasing demand for quick processing, document storage, and lower costs and processing times for loans.
In 2022, North America led the market with 33.0% of the revenue share due to the presence of digital lending providers across North American nations. North America has been a leader in implementing cutting-edge technologies. A big mobile workforce especially prompts financial institutions in the area to digitize their services and improve customer experience.
Asia Pacific will lead the market in the coming years due to a rise in fintech companies and internet usage. With a large population and a high percentage of individuals who are unbanked or underbanked, the region presents a significant market for alternative financing options. These people have easy and convenient access to finance because of digital lending platforms.
Some Asian nations have regulatory frameworks that are supportive of advancing innovation and digital financial services. For instance, The Singapore Variable Capital Company (VCC), a legal framework created by the Monetary Authority of Singapore (MAS), enables the development of collective investment schemes, such as digital lending platforms, under a single corporate structure. For Singapore-based digital lending platforms, this approach offers regulatory clarity, flexibility, and operational efficiency.
LendingClub (Market Revenue USD 246.6 Mn)
LendingClub offers business lending solutions as well as personal loans of up to 40,000 dollars. According to the business, applying online for personal loans only takes a few minutes, and approvals are frequently given within 24 hours. For those who are accepted, LendingClub can direct deposit funds into a bank account or pay creditors on their behalf.
Prosper Marketplace (Market Revenue USD 116.3 Mn)
Prosper is a platform that brings together people who want to borrow money for consumer credit and those willing to invest in it, including individuals and institutions. Borrowers complete a brief survey about preferred loan amounts and intended uses. The Prosper platform suggests loans that best fit the borrower's needs.
SoFi (Market Revenue 1.75 Bn)
The SoFi mobile app is available for banking, investing, and borrowing. Student loan refinancing, personal loans, and private student loans for events such as weddings and home renovations are the financial options offered by the company.
Avant (Market Reveneu USD 9 Mn)
The loan application procedure is made simpler by Avant using fintech. By filling out some information, selecting a loan purpose, and signing an electronic agreement, loan applicants can receive $2,000 to $35,000 in their bank account within one day.
Avant offers a credit card for accessing credit lines to pay for larger expenses such as buying a car, home repairs, or small purchases.
LendingTree (Market Revenue USD 822.75 Mn)
LendingTree assists borrowers in comparing rates for student loans, personal loans, mortgages, and business loans. Users can utilize LendingTree's single form to get matched with lenders from the company's network without providing multiple lenders access to their private information.
Kabbage
The SMB credit provider Kabbage assesses business-focused alternative data such financial data, internet sales, and shipping. Kabbage offers real-time financing options based on detailed data analysis for better performance understanding.
OnDeck
OnDeck was a pioneer in the use of data analytics and digital technologies to quickly approve loans in real time and provide money to small businesses online. In order to assist banks in creating their own digital small-business lending products, OnDeck introduced ODX in 2018.
Lendingkart
Lendingkart is a platform that provides online loans for businesses. It provides loans, including working capital loans, SME loans, loans for women-owned businesses, and more. It offers an app-based platform that works with Android phones and tablets.
Affirm
Users can make small installment payments for online purchases using the financing platform Affirm. The company offers interest rates as low as 0% and gives consumers the option of three- to 36-month payment plans.
PolicyBazaar.Com
PolicyBazaar is largest insurance aggregator in India. It provides a website & mobile application where users can compare financial services from insurance firms. It offers insurance plans, including group policies, life, health, auto, and travel insurance.
Fundbox
To assist firms in swiftly getting loans and lines of credit, Fundbox leverages big data analytics. The corporation can make a credit judgment in less than three minutes based on the data supplied by a firm's accounting software or bank account.
Blend
Blend is a platform created to assist lenders in accelerating and streamlining the loan and mortgage application approval process.
Banks and clients around the world, such as Wells Fargo, U.S. Bank, Assurance Financial, and Affinity Federal Credit Union, have used Blend.
Cred
Cred is a members-only network that offers incentives for making timely credit card payments. It provides cred coins to users as payment for bills, which can then be used to reveal premium brand incentives and special offers.
Capital Float
Capital Float provides specialized credit and loans to companies. This fintech startup uses unique loan underwriting methods to lend to potential borrowers.
Money Tap
One of the greatest fintech businesses in India, MoneyTap offers immediate personal loan services to its clients. It provides flexible terms and affordable interest rates for loans up to Rs 5 lakh. It is the first to offer loans using an app with a "tap."
PineLabs
Pine Labs offers funding and technology for last-mile retail transactions. It has over 70,000 retailers in India, including stores like Marks & Spencer Retail, Shoppers Stop, Pantaloons, and Westside.
Biz2Credit Inc.
Small businesses can get fair loans from Biz2Credit to get the money they need to advance their operations. It provides term loans up to $500,000, working capital loans starting at $25,000, and commercial real estate loans up to $6,000,000.
Supernova Technology
Supernova Technology, Wisetack, Stride Funding, Gynger, Reggora, OppFi, Earnest, Billd, Braviant Holdings, NinjaHoldings, Stavvy, ChargeAfter, Hometap, Self Financial, Sunbit Inc., LoanStreet Inc., Funding Circle, Credible, etc., are among digital lending companies operating in the marketplace.
Following are the list of digital lending start up company:
Lower Mortgage
Lower provides a range of services, including mortgage refinancing, consumer lending, house buying, and financial services. The organization offers conventional, FHA, VA, USDA, and jumbo loans for house purchases. It also provides refinancing, including cash-out and rate-and-term loans. It has received a funding of around $ 100,000,000 by Accel.
SoLo is an online community where users can easily find and offer short-term funding for urgent needs. It provides a marketplace for peer-to-peer financing for microloans. Members can use it to access and provide short-term funding for urgent needs.
It has received a funding of around $ 12,920,000.
Cross River is a financial organization that offers loan products & banking services to individuals and companies. To provide secure, API-based banking platforms and products that cover lending, payments, risk management, and banking-as-a-service (BaaS) offerings and enable a full-service and user-friendly banking experience for its clients, the company places a strong emphasis on regulatory compliance and consumer protection.
It has received a funding of around USD 620 Mn by Andreessen Horowitz & Eldridge.
Slice is the best credit card rival in India for money management, bill payment, and instant rewards. It provides credit cards for online and offline transactions, cash withdrawals, and bill payments. Users can utilize it to obtain cash loans and make installment payments. Additionally, it provides a virtual credit card for use during online transactions. Devices running iOS and Android can access the app.
It has received a funding of around USD 50 Mn from Tiger Global.
Mambu is a financial engine that offers deposit & lending services as software as a service. It gives consumers access to a platform that offers a variety of solutions, such as banking solutions driven by APIs, solutions for managing the life cycle of loans, security and compliance solutions, and more. Additionally, it offers deposit and loan alternatives and integrated financing with payment services.
It has received funding of around euro 200 Mn from EQT Partners.
KreditBee is a lending platform developed to help young professionals in handling their money. It has issued over $2 billion in loans in the last three years. Young professionals can apply for Salary Advances up to $1 Lac on KreditBee based on their needs.
Between borrowers and NBFCs/Banks, KreditBee enables loan transactions. Every loan application is reviewed and sanctioned by NBFCs/Banks registered with the RBI, and this information is disclosed up front.
It has received funding of around USD 120 Mn from Advent International.
Octane. Co allows powersports buyers to research vehicles, prepare for a loan, and check rates instantly without affecting their credit. It offers a platform that connects customers with lenders and credit companies for car finance. It offers loans for two-wheelers, ATVs, and lawn mowers with specific periods, amounts, and repayment alternatives.
Octane has raised a total of USD 1.6 Bn in investment. The most recent investors are Upper90 and Valar Ventures.
The company's platform enables first-time homebuyers and homeowners to acquire their houses in a fast, hassle-free, cost-effective, and low-risk way. It also offers refinancing and loan underwriting services that help homebuyers and specializes in FHA loans, VA loans, and USDA loans.
It has received a funding of around $ 92,103,000 from Y Combinator, Signal Fire, & DN Capital.
Working families can get low-cost loans from the financial services provider Aura to help them establish their credit. The platform offers unique scoring algorithms to evaluate and approve credit applications as well as offers free credit ratings and tailored spending management advice to borrowers.
There are 31 investors in Aura Financial, including Bridge Bank and Varadero Capital. It has received a funding of around $ 584,700,000.
Owner of a cutting-edge NBFC in India founded to compete with conventional lending practices. Consumer loans, house loans, school loans, and small-to-medium firm loans are among the services offered by the organization. These loans use technology and data science to speed up the lending process and make it hassle-free for customers.
InCred has raised a total of USD 254.4M in investment. The most recent investors are Kamlesh Ohri and Asas Capital.
OfBusiness, MyMoneyMantra, Funding societies, Built Technologies, TenantCloud, Athena, Validus, LendingPoint, Carpay, Indifi Technologies, Mintos, KoinWorks, Finja, Simpl, Lendio, Kissht, Lendbuzz, etc., are the top digital lendings startup company operating in the market place.