Home Finance The Evolution of the Lending Market: A Lesson in Fintech Genius

The Evolution of the Lending Market: A Lesson in Fintech Genius


In the days of old, the lending process operated in a rigid way. Customers were required to call their broker to find out about loans and interest rates. The archaic system was characterized by lengthy wait times, bureaucratic gobbledygook, and often depended on establishing a relationship of trust between the mortgage broker and the customer. Fast-forward to the present day.

The evolution of the lending market is such that anyone can search for an online loan from a PC, Mac, Android, or iOS device and be approved within minutes. Such is the speed, efficiency, and customer-friendly nature of online lending today that anyone can access this market and be greenlighted for a loan. Caution is the order of the day since the interest rates charged by lenders remain high, despite improved technology and accessibility.

Forbes Magazine recently inked an article about the online lending industry. In the exposé, the merits of online lending were extolled, particularly alternative lending suppliers that act in direct competition to banks and established financial institutions. These FinTech companies are generating significant profits in online lending, and it is clear that customers find value in these company’s services.

Typically, the process of being approved for a loan by a bank or traditional financial institution is arduous, painstaking, and lengthy. Banks are subject to strict regulatory requirements that necessitate a thorough investigation of the borrower’s ability to make good on repayments. Income tax returns, letters of employment, credit history, personal interviews, and outstanding financial commitments are often factored into the equation with banks.

With online lenders, many of these requirements have been relaxed, to facilitate the lending process. Certain lenders actually act as go-betweens to pair the right buyer with the right loan provider – assuming 0% risk and getting a cut of all loans that are approved. Today, one of the most important drivers of online loans is high credit card debt. People are finding it increasingly difficult to repay their debt burdens, and so they turn to third-party providers of loans and financial services – Debt Consolidation loans, 0% APR credit cards, payday loans companies etc.

While there are merits in being able to access loans at the click of a button, it pays to be cautious. Too much debt – regardless of where it comes from can be a bugbear. The trend in recent years is such that non-bank lenders are eating into banks’ market share. This trend is likely to continue if the ‘unconventional’ lending options remain viable and attractive to customers.

Bank-Beating Deals through Non-Bank Lenders

From a competitive perspective, non-bank lenders – i.e. the FinTech sector – needs to hone in on specific components of what banks do and do them better than banks. This is what the online lending market is capable of. Nowadays, the ubiquity of online calculators for determining your lending needs (principle + interest + repayments) make it much easier to gauge your requirements. A quality small business loan calculator can help you to determine whether you will be able to get qualified for a business loan from an online lender.

The best-rated lenders nowadays include Prospa, Capify, Sail, and Spotcap. Each of these loan providers offers flexible funding options, and typically caters to new businesses and established businesses. Today, you can apply for an online loan as a small business, and you can determine your eligibility within 60 seconds. If you’re approved, the funds will be transferred direct into your bank account within 24 hours. These are bank-beating deals and they are certainly enticing to borrowers.