Here’s how the digital lending landscape is transforming

By Puja Sharma

The rapid growth of the global digital lending platform market is attributed to a continuous increase in digitalisation initiatives among financial organizations and rising government initiatives for digital lending in developing countries, such as India and China. However, the surge in security & compliance concerns is expected to hinder the growth of the digital lending platform market. On the contrary, technological advancements, such as AI integration in digital lending platforms, and the rise in penetration of cloud-based platforms are expected to present major opportunities for the digital lending platform market growth during the forecast period.

The digital lending platform market size was valued at $5.58b in 2019 and is forecast to reach $20.31b by 2027, growing at a rate of 16.7% between 2020 and 2027. The platform is used for applying for, disbursing, and managing loans. Using the digital lending platform, borrowers and lenders can lend money via paperless or electronic means, resulting in greater ease of use, enhanced customer satisfaction, and a reduction in overhead costs due to a shorter verification process.

Digital lending platforms were dominated by North America in 2019 and are expected to remain dominant throughout the forecast period. Increasingly, personal-focused lenders, SME-focused lenders, and student-focused lenders have established themselves in the region, and major players have invested heavily in market development. The Asia-Pacific region is anticipated to experience a significant growth rate during the forecast period, as a result of government initiatives for the digital lending platforms, as well as the adoption of advanced technologies such as AI and machine learning by banks and FinTech firms.

The digitalisation of financial services

Digitisation has been one of the most widely adopted strategies in financial services to improve core processing capabilities and offer better consumer services and insights. In addition, these organizations have reportedly increased their sales percentage by focusing on the digitalisation of their financial services. A study has revealed that investments in financial technologies witnessed notable growth in 2018, which was almost twice that of 2015.

In addition, more than half of these investments have been associated with lending and payments. Digitisation in the lending landscape has helped organisations and their customers with better loan management decisions as well as rapid application and disbursement processes. Thus, the increase in the focus of organizations on digitalising their financial services to achieve business efficiency and enhanced outcomes drives the growth of the digital lending platform market.

From traditional to digital

With the increase in penetration of smartphones and internet users across the globe, online banking has witnessed significant growth in recent years. Digital lending is considered one of the convenient and widely used options for lenders, as it provides instant affordability for applications. Multiple businesses and individuals have started filling applications online for taking loans in recent years rather than getting into the time-consuming lending process.

According to Federal Reserve, about 49% of small businesses applied for loans across the globe from various nonbanking and banking institutions. The ease of applying for loans for borrowers and numerous other benefits for lenders, such as automated loan management, and rapid approval are shifting their attention toward digital lending, thus driving the digital lending platform market growth.