DIGITAL LENDING MARKET ANALYSIS

The global digital lending market size was valued at USD 334.7 million in 2021 and is anticipated to witness a compound annual growth rate (CAGR) of 26.9% from 2022 to 2030. The global digital lending market is witnessing strong growth due to growing advancements in artificial intelligence and machine learning algorithms, rapid adoption of smartphones leading to increased consumer awareness and the number of digital lending start-ups around the world. Moreover, the market is growth is also being fueled by rapid adoption of digitization in the BFSI sector and changing consumer behaviors. 

Global Digital Lending Market: Regional Insights

The global digital lending market is geographically segmented into North America, Latin America, Asia Pacific, Europe, and Middle East & Africa.

North America among regions is expected to dominate the global digital lending market over the forecast period. This growth can be attributed to early adoption of digitalization across several sectors, presence of strong economy, high rate of investment, and strong presence of prominent solution providers in the region. Moreover, government and private organization invest strongly for development and growth of R&D activities in the region.

Moreover, Asia Pacific is also anticipated to witness substantial growth in the global digital lending market over the forecast period, owing to lack of significant regulations leading to rise in number of market players in China, and growing adoption of smartphones, rise in access to internet, and shifting consumerism in India among other countries across the region.

Figure 1. Global Digital Lending Market Share (%), By Region, 2021

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Global Digital Lending Market Drivers:

Rise in number of potential loan purchasers with digital behavior is expected to propel growth of the global digital lending market over the forecast period. Millennials with shorter work experience and who are new to credit system often face unapproved loans or get high interest loan. Furthermore, the ‘the time to decision in conventional banks for corporate and small business lending is usually between three and five weeks. Due to these challenges, the digital behavior of customers turning to mobile devices for getting access to the process of digital lending applications is increasing. This factor is further expected to drive the market growth in the near future.

Moreover, increasing government regulations are leading to rise in digital behavior, which in turn is anticipated to boost growth of the global digital lending market over the forecast period. For instance, in August 2020, the government of India announced that the country will be launching a digital lending platform named Kashi (Cash over Internet) in order for the approval of loans to low income households as well as small businesses. Thus, such government initiatives and policies are leading to rise in digital behavior. This further is likely to support the market growth.

Global Digital Lending Market Opportunities:

Increasing development of artificial intelligence in digital lending is expected to offer growth opportunities for players in the global digital lending market during the forecast period. The rapid AI development is likely to be an important part of the digital lending sector. The use of AI can improve services in analysis, pricing and decision-making of loans, which will a significant aspect of delivering lending services in the future. For instance, Kreditech, a Germany-based online lending company utilizes artificial intelligence for judging potential borrowers in emerging countries with no or very poor credit score.

Furthermore, increasing rate of digital lending in middle-income countries such as China and India is also expected to create growth opportunities in the global digital lending market over the forecast period. The rise of digital population, technologies such as AI and big data, supportive regulatory policies, and increasing innovative lending systems in these countries are supporting the market growth. The companies functioning in this sector are focusing on expansions. For instance, in August 2019, a digital lending start-up, Tala, raised US$ 110 million in funding for expansion in India. Thus, this factor is likely to support the market growth in the future.

Global Digital Lending Market Trends:

The global digital lending market is witnessing various trends, such as changing expectations of borrowers, which in turn is expected to augment growth of the market over the forecast period. Due to changing expectations of borrowers, the demand for lenders are likely to grow, as customers are influence by intuitive, accessible digital experiences, as the need for lengthy paperwork is eliminated in digital lending, as these platforms support the automated multiple manual process. Moreover, larger number of population around the world has access to internet, which is expected to aid in growth of the market.

Increasing number of digital technology platforms with ability of objectively qualifying and targeting market segments is another trend in the global digital lending market. With the ability to objectively qualify and target various market segments such as housing societies, small retailers, religious and nonprofit organizations, of digital technology platforms offers a competitive edge, which is being targeted by several lenders. Moreover, lenders are also focusing on new market segments for sustaining market growth as tapers demand is declined in traditional markets. This trend is likely to continue in the market over the forecast period.

Global Digital Lending Market Restraints:

Concerns such as data security and privacy issues are expected to hinder growth of the global digital lending market over the forecast period. The sector of financial services has to deal with sensitive information regarding enterprises and individuals. With increasing advent of digital lending startups, the number of data available in digital format has grown. Due to this, analyzing and generation of insights becomes easier; however, the data becomes highly susceptible to security concerns. Thus, this factor is likely to hamper the market growth.

Furthermore, high dependency of conventional lending procedures, is another factor anticipated to obstruct growth of the global digital lending market over the forecast period. Several organizations depend on conventional lending methods that usually require lot of time and are complex. As these organizations have set customer base and standard procedures for credit underwriting, the adoption of new innovations in these organizations is low. Moreover, there is also a lack of awareness regarding digital lending, and skillsets as well as training required for managing new solutions. Thus, these factors are expected to impede growth of the global digital lending market over the forecast period.

Figure 2. Global Digital Lending Market Share (%), By Type, 2021

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Global Digital Lending Market Segmentation:

The global digital lending market report is segmented into Type and Region.

Based on Type, the market is segmented into Business and Consumer. Out of which, Consumer is expected to dominate the global market over the forecast period and this is attributed to the increasing innovations in digital lending, rise in government initiatives for promoting greater financial inclusion as well as for extending high-quality financial services to understand underserved businesses and communities.

Business segment is also expected to witness significant growth in the near future and this is owing to the increasing digitalization of lending platform. As these digitalized systems offer interactive web applications, and other benefits that adds value to overall customer experience. This in turn is expected to drive growth of the segment.

Global Digital Lending Market: Key Developments

In July 2020, On Deck Capital Inc. made an acquisition agreement with Enova International and with this agreement, Enova will be acquiring all outstanding shares of OnDeck in stock and cash transaction that are valued at nearly US$ 90 million.

In October 2019, Lendingclub Corp. introduced LCX, a first-of-its-kind marketplace designed for connecting a wider array of institutional investors to its new digital platform. This platforms provides dynamic pricing and same-day settlement of completely funded whole loans.

Global Digital Lending Market: Key Companies Insights

The global digital lending market is highly competitive. This is attributed to continuous launch of new technologies due to ongoing R &D and efforts by value chain participants. Moreover, key players are adopting various business growth strategies in order to expand their presence on regional as well as global basis.

Some of the key players in the global digital lending market are On Deck Capital Inc., Lending club Corp., and Social Finance Inc. (Sofi)

*Definition:

Digital lending platforms allow consumers to apply for a loan in a matter of minutes. Traditional banks, on the other hand, can take hours or even days to process an application. They may take as long as 90 days to approve the loan. Digital lenders are constantly experimenting with new ideas and evolving their products, making the digital lending landscape more complex.