LendTech Market Research
Technology has opened up a new market for consumers, small business and business loans since 2007. “LendTech” has the potential to transform the finance industry. Other types of technology have disrupted retail and travel. LendTech is the next frontier. Some LendTech companies are balance sheet lenders that offer short-term loans. Other companies use a peer-to-peer model, providing bigger loans for longer terms.
One of the things LendTech companies have in common is that they use technology to run a credit market. They operate this market at a lower cost than old-style bank loan platforms. They pass the savings on to their clients in the form of lower rates. They pass it on to their financiers through solid returns. They favor both consumer and investor. These companies are thus earning high satisfaction ratings in the financial services industry.
Who Uses LendTech?
Small businesses use LendTech. For example, Amazon makes funding available to its sellers. The online market giant caters to many small businesses. It is in a unique position to know the selling history of these businesses, and which ones can handle a loan.
Consumers also use LendTech. For example, they use services like PayPal credit to buy items they couldn’t otherwise afford. They also use LendTech for personal loans and mortgages.
One of the significant advantages of LendTech is that it offers low-interest rates. Businesses and consumers also use it because LendTech loans are easy to secure. Lenders who don’t qualify for loans from the traditional sector can now be eligible for funding.
How Does LendTech Work?
LendTech uses complex algorithms to match creditors with borrowers. It does this matching according to the specifications of each party. These platforms assess borrowers according to their credit scores. They also look at social media activity to link the two parties at favorable interest rates. Borrowers fill in their details on online applications. They then upload supporting documents on the portal.
LendTech lenders use bank-grade security. They also provide real-time notifications about the loan application status of prospective borrowers. Their system makes efficient communication between lenders, borrowers, and third-party brokers possible. It allows for faster, more straightforward engagement. Playing phone tag and using insecure email exchanges are things of the past.
LendTech Opportunities & Challenges
The market opportunity for LendTech is immense. The consumer lending market in the US alone is almost four trillion dollars. Smart startups have been exploring the traditional lending models. They are stepping in where the traditional lenders have chosen to retreat. Some specialize in niche markets, such as student loans. Others, such as Lendio, do not grant loans. Instead, they provide a matchmaking service between lenders and borrowers.
For now, LendTech companies have the advantage in quick online loans. Banks may surpass them yet. Some banks are moving at a rapid pace to develop their technology. A few are already selling their technology to others. Another challenge is regulation. LendTech companies have to bear the overheads of regulation. However, some are not able to easily collect deposits. Other problems may be on the horizon, and will only manifest during events like a recession.
Artificial intelligence can check much more information than a human can. This capacity generates efficiencies for lenders. Often LendTech companies use this technology together with human control. For example, a LendTech company might use AI to rate customers. They would then pass customers above a particular rating to a manual loan assessor.
Why is LendTech Important?
Traditional banks are holding on to an outdated lending model. Our society has become more complex, and borrowers need fairer assessments for funding. LendTech can do rapid assessments of prospective borrowers’ online reviews. It also uses background checks and other indicators to determine one’s fitness for a loan. These factors will impact the future of online lending. LendTech may well become the first stop for individual and business borrowers.
About LendTech Market Research and Strategy
SIS FinTech Research and Strategy conducts comprehensive research solutions including:
- Customer Interviews
- Focus Groups
- Market Opportunity & Entry Assessments
- Competitive Analysis
- Usability Research
- Customer Surveys and Research