Can today’s borrower live without a bank?

Banks today are inefficient, offering high rates of interest to borrowers and little profit to depositors. Since the recession in 2008, banks are constrained by tighter regulations, increased capital...

Snehal Fulzele 14th April 2015

Banks today are inefficient, offering high rates of interest to borrowers and little profit to depositors. Since the recession in 2008, banks are constrained by tighter regulations, increased capital requirements and a more conservative approach to risk. As a result, they are under-serving consumers on product, price and service. A Viacom survey of millennials showed that 33 percent believe they won’t need a bank at all and nearly half are counting on tech startups to overhaul the way banks work. In fact, all four of the leading banks in the US are among the ten least loved brands by Millennials. Banks have lost the confidence of today’s well informed, connected and mobile millennials who are diverting their interests towards alternative lending which provide fast and easy access to credit.



future-of-bank1With the days of high street banking slowly falling into the past, the key to success depends upon accessibility, convenience, creativity and problem solving through technology solutions. Non-bank lenders are becoming a critical source of funding, fuelled by the growing developments in technology and combined with the evolving needs of customers to have access to more convenient online and mobile solutions for their banking demands. These non-bank platforms match borrowers directly with lenders based on their unique credit scoring model, removing banks as financial intermediaries. By eliminating the need for traditional banks, non-bank lenders improve efficiency and reduce unnecessary friction in the lending and buying process. These lenders not only address prime borrowers but also those borrowers who are creditworthy but unable to qualify for loans from banks. If a bank says no to a borrower’s loan application, she can easily access non-bank lenders such as Lending Club, DealStruck, Kabbage and Zopa at affordable interest rates. In addition, non-bank lenders are also providing funds to small businesses, considered high risk and often overlooked by banks, thus, fuelling growth.



Not only this, governments are also advocating for new forms of finance. The UK government recently announced and is expected to release guidelines for making earnings from P2P loans interest free, thus, making them an attractive source of investment.



To sum up, the alternative lending space could support a financial system that offers everything banks offer today, just more efficient, stable, and convenient. Such a financial system should also be more resilient against any economic meltdown, and should offer more convenient services than the banking system we have today. Banks, however, are not going anywhere. Their roles will eventually transform, lending to non-bank lenders and focusing on other big ticket items. More about this in our next blog!

Resources

NEWS

Cloud Lending Solutions Expands Leadership Team with New Executive Hires

Cloud Lending Solutions adds Chief Revenue Officer and Chief Financial Officer as the Company Focuses...

DigitalLEND Connects Borrowers and Lenders Through Rapid Deployment-Ready Customizable Solution

Cloud Lending Solutions, Crowdnetic and eOriginal Partner to Offer Turn-Key Solution to Solve Traditional Lending...

BLOGS

Regtech Meets Fintech – How It Improves Lending?

Lending as an industry is prone to risks and frauds. The added weight of growing ...

Opti-channel banking – way forward for better customer engagements

With an upsurge in technological innovation and the rise of digitally equipped millennials, banking and ...

EVENTS

DLAI FinTech Conference – 2018

India's Largest Fintech Conference Keynote Sessions 1. Consumer Lending - The Emerging Frontiers 2. SME ...

NEFA Finance Summit 2018 (Conference)

The National Equipment Finance Association (NEFA) is a national association serving small- to mid-size independent ...