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How Is Technology Set to Transform Consumer Lending?

The unrelenting changes in today’s markets have kept businesses and entire industries on their toes, and the financial sector is not an exception. Digitalisation, combined with new expectations from customers, is altering how the lending industry operates.

Think of the digital unsecured consumer lending market, for instance. Digital lending was a response to customers’ pain-points like laborious loan processes and the need for collateral and credit history to borrow from banks.

Alternative lenders are filling gaps where banks and finance companies have made their lending facilities harder or inaccessible for customers who prefer digital services. Banks are now exploring this market and PoS financing to reach a larger consumer base. But to reach these consumers, banks must consider adopting technology and partnering with fintech institutions to deliver relevant services to underserved customer segments. This is just one scenario that will test the future readiness of banking and financial services.

Broadly speaking, two things are paving the way for the future of consumer lending and consumer finance services.

  • Technological advancements and digitalisation
  • Consumer intelligence and experience

Technological advancements and digitalisation in consumer lending

Today, it’s imperative to use technology to streamline consumer lending and facilitate a robust cashless and digital economy. Here are a few developments that are revolutionising the lending industry.


Consumer data is growing exponentially. Trended data, which covers directions and tipping points in the consumer’s credit history, improves predictive performance, and alternative credit data sources – like property and bill payments – now make a well-rounded view possible.

The availability of trended data and alternative data sources allows the lender to study the creditworthiness of the consumer, providing a clearer and holistic picture that makes more accurate risk assessment possible. Credit scoring, with alternative data backed by data science and predictive analytics, can improve lending performance for banks, consumer credit companies, and insurers.

Collation of data at a central repository lets lenders access, analyse, and make crucial decisions based on consumer behaviour and current market trends.

Artificial Intelligence (AI)

The advent of artificial intelligence will transform the core process of consumer lending.

AI technology is aimed at upgrading and easing administrative tasks, enabling bank employees to free themselves from time-consuming activities and focus on customer relationships. Seamless onboarding of customers and reduced turnaround times in risk and compliance tasks are made possible with AI-driven interactions. Such positive consumer experiences can improve customer loyalty and referrals.

Artificial intelligence can also make predictive banking possible that will provide customer engagement and retention. It enables collating and analysing raw information for better cognisance and drawing valuable insights in a data-centric lending industry. The boom of AI can also empower fraud detection and elimination.

RPA and APIs

Speed and simplicity are no longer a bonus. They are a must-have in the world of finance today.

Robotic process automation (RPA) is the right fit for lending processes. It can be used to quickly process loan initiation, documents, comparisons, verifications, and to handle exceptions. Faster processing leads to improved customer experience (CX).

When RPA is combined with the right APIs, financial institutions and banks can instantly respond to consumer queries and convert them to business revenue.

User-defined, interactive application programming interfaces (APIs) have given a total face-lift to the banking and lending industry, moving the modus operandi away from traditional lending processes. APIs let financial institutions access the data they need, to engage potential customers, securely.

Banking applications have greatly assisted consumers in accessing their accounts and using services, safely and securely, even from remote locations. This has dramatically improved and accelerated smooth business flow and turnaround time (TAT).

Identity and cybersecurity

As transactions become more digital and remote, cybersecurity and identity protection become even more crucial in the business of lending.

In this industry, there is an element of trust that opens a doorway to borrower defaulting; this is the biggest risk for lenders. However, regularly updated loan data and credit information can help lenders make business decisions with increased assurance. With new technologies like blockchain and biometrics, incongruences can be detected and duplicity exposed. Thus, there is more transparency, which opens doors for new consumers.

Consumer intelligence and experience
With the help of technology and the right skillsets, banks and lenders can identify customer needs proactively and provide a richer user experience.

  • Increased consumer control
    Previously, much of an individual’s financial data (history, transactions, payments, etc.) was held by banks and lending institutions. But now, consumers are stepping up to take control of their financial activities, understand their creditworthiness better, and try to improve financial benefits. Consumers now want to track the status of loans, mortgages and credit; compare and find better rates; and discern and manage access to their financial data.

    With a knowledge of digital finance, consumers now have a heightened sense of cybersecurity. The Payment Services Directive (PSD2), General Data Protection Regulation (GDPR), and Open Banking in Europe and the UK are all initiatives taken to transfer control of personal data to consumers.

  • Wealth management solutions
    Earlier, a large section of the rising middle class did not have access to basic wealth management solutions owing to unawareness and a lack of extensive financial services. Now, enterprises are using finance technology to upgrade platforms and offer a full suite of services to consumers who were previously ignored.

  • One-stop shop
    Consumers aren’t approaching financial institutions for just loans; they are looking for more value and a positive borrowing experience. Discerning consumers are on the lookout for responsible lending, which includes transparent processes, terms, and conditions; affordability; fair treatment; comfortable repayment options; and support for the customers’ best interests.

    Banks, lenders, and financial institutions should be on the lookout for opportunities to provide top-notch services and create value for consumers. Apart from handling a loans, lenders should offer personalised advice on the overall performance of an individual’s financial data. Such service can be provided by partnering with experts, and using innovative solutions for common problems consumers face.

  • Consumer emotion
    With the enormity of data available today, it is easier to gain insights into consumer emotions and behaviour through analytics. Lenders can now know what their customers truly want, enabling them to provide a gamut of services based on more personalised interactions.

    The lending market is ready for change, with traditional lenders moving toward digital platforms and with a lot of focus on personalised customer experience at all touchpoints. Matchmaking between the borrower and lender is progressing to meet the interests and needs of both.

    Banks should consider enhancing CX the digital way for the next generation of consumers. Offerings in digital unsecured lending, automation of underwriting, and data and analytics to identify reliable borrowers can help banks stay in the race with fintech enterprises. They need to ensure credit risk and fraud management teams work together to make the most of all available data.

    Fast adoption of technology, investments in strategic skillsets, and timely use of data can make for a much improved lending experience in the future.