Digital Lending Platform market is projected to surpass USD 17 billion by 2025. The market growth is attributed to the growing demand among financial institutions, such as banks and NBFCs, to reduce the risk of frauds and NPAs. The growing digitization and rapid cloud adoption across financial institutions are proliferating the market growth. (Source: Global Market Insights Inc.)
The integration of advanced technologies, such as AI, ML, blockchain, and advanced analytics, with the digital lending platform secures and quickens loan processing, approval, and disbursal. The rising internet penetration coupled with the proliferation of smartphones across the globe supports the growing use of the digital lending platform to avail loan. Financial institutions deploying these advanced technologies are focusing on specific use cases to improve the cost and functioning of core infrastructure.
The proliferation of smartphones & tablets is supporting digitization across the globe. This helps financial firms to reach out to a wider audience to push their lending products through short advertisement or notification on smartphones & tablets. The emergence of technological advancements, such as e-signature, biometrics, and cloud platforms, to store digital documents has made the digital lending process faster, hassle-free, and cost-efficient.
The cloud-based digital lending platform is projected to exhibit a significant CAGR over the forecast timeline. The growing demand from financial institutions for documentation storage, fast processing, and reduced time & cost related to loan processing is contributing to the proliferation of the cloud-based digital lending platform. Additionally, it diminishes the service and maintenance requirement for the digital lending platform, enhancing the operational efficiency and reducing the down time. The availability of the pay-per-use business model in software-as-a-service and cloud-based offerings in the digital lending platform improves future flexibility and low upfront cost for financial institutions.
Supportive government initiatives are increasing the use of online payment methods to curb money laundering and fraudulent transactions. For instance, in November 2016, the government of India announced demonetization of all INR 500 and INR 1,000 banknotes of Mahatma Gandhi Series, which propelled the use of digital payment methods in India. This helps financial institutions to obtain the financial & personal data of individuals & organizations, which further helps them to check credit worthiness of credit seekers. It reduces the risk of NPAs and frauds.
The government intends to encourage healthy competition to create a sustainable and effective industry with many new technology players entering the market to offer innovative solutions. The government wants to ensure the stability of the digital lending platform system as a whole by managing emerging bubbles & potential system risks and identifying new ways to support technologies that drive market growth.
The fintech companies segment is estimated to exhibit a significant CAGR over the forecast timeline. Fintech companies, which specialize in several lending services, such as P2P lending, SME finance loans, personal loans, and automobile loans, are receiving substantial investment to grow and offer loans to potential credit seekers. Angel investors and financial institutions with deep pockets are investing in these fintech companies. For instance, in 2018, fintech companies in North America received funding of over USD 9.10 billion and Asia Pacific fintech companies received funding of more than USD 5.80 billion. These firms are focusing on narrow target customers, such as salaried employees above the salary of USD 300, to offer loans ranging from USD 150 to USD 1,500. The increase in venture funding to fintech companies coupled with the growing consumer trust on fintech companies is supporting rapid adoption of the digital lending platform. Additionally, it helps them to develop innovative digital lending solutions, flexible payment methods, and demographic-focused products.
The technology partnership in the digital lending industry is anticipated to improve customer engagement and a faster & transparent credit lending experience to customers. Technology leaders are expected to benefit digital lenders from the risks of NPAs and bad loan credits.
The fintech companies are offering collateral free loan at low-interest rates and they approve & disburse loan to individuals and organizations in short duration. This caters to the demand for smaller personal loan for several social occasions. Additionally, this supports the growth of SMEs that were previously facing challenges in loan approval due to unavailability of collateral. The growth of SMEs is a prominent factor in improving the country’s GDP.
Major players in the digital lending platform market are focusing on various business growth strategies such as strategic alliances and developing innovative digital lending solutions. Strategic alliances enable them to widen their existing portfolio and increase their geographical reach. For instance, in April 2019, Xiaomi partnered with KreditBee to offer loans to MIUI users in India above the age of 18. The credit amount ranges from USD 14.53 (INR 1,000) to USD 1,453.10 (INR 100,000).