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Lending to financial technology firms (Fintechs) has been evolving as competition in the space grows. Researchers at World Economic Forum recently examined trends in lending for fintech organisations over the years and how the landscape is likely to shape up.
The first half of the decade has seen rapid developments in lending, with the entry of several new forces that threatened to change the lending landscape and the future centres of power.
The major forces that drove lending in 2015 include person-to-person (P2P) which grew quickly reaching a significant number of customers across the globe. In Nigeria, the rise of angel investors can attest to this fact. Lenders relied on the new ways of measuring and tracking credit worthiness which more than ever ensured return on investment (ROI).
New lenders in the space may be increasing and enforcing disruption in the lending market but WEF notes that their appetite for scaling innovation may not be robust enough. To be sure, individual and small-business borrowers expect their lender to deliver the seamless digital origination and rapid adjudication pioneered by leading fintechs.
In credit terms, adjudication refers to the action of a judge making a decision to bankrupt someone, based on the facts presented to him or her, and coming to the conclusion that the person cannot continue to pay their debts as they fall due.
WEF researchers state that traditional lenders like banks or microfinance institutions are looking to their existing stores of data to bolster their underwriting models especially for underbanked customers. However, that data is often unstructured and siloed, making it difficult to be put to use. To address these challenges, incumbents are investing heavily in data transformation, automation and new analytics.
“Improving processes and building middleware have both proven to be relatively expensive. Incumbents have thus looked at partnerships with marketplace lenders, allowing them to access fintech-driven technological solutions without fully overhauling their infrastructure,” WEF notes.
FRANK ELEANYA
