With the advent of the digital revolution, everything from shopping to banking is at one’s fingertips. Consumers today prefer real time solutions and ease of service, challenging the financial industry to adopt a customer-centric approach. As technology grows, our patience wears thin.
With the rise of Financial Technology, aka Fintech, many startups are providing technology solutions to consumers to facilitate quick financial transactions and easy access to credit. Consumers, start-ups, small businesses and entrepreneurs alike are turning to alternative lenders for credit. They value convenience, mobile support and ease of use. Presently traditional financial institutions thrive on loyalty rather than up-to-date software. But then loyalty is a dying concept as well. According to the Millennial Disruption Index, 53 percent of millennials think their bank offers nothing different than other banks and 1 in 3 are open to switching banks in 90 days.
This fading concept of cash and loyalty and the rise of fintech is attracting an interesting mix of crossover plays. And guess who is watching this closely? Tech giants such as Apple, Google, Amazon and Facebook are trying to jump on to the fintech bandwagon as well. With their enormous global following, flexibility and customer-centric strategy, these tech companies can provide quick and efficient payment services, money transfers and loans to consumers. They have access to consumers’ personal data that can be effectively used to make lending decisions. Moreover, these companies are household names and are accessed by millions of people daily through their computers or smartphones. The prospect of offering loans certainly looks attractive, doesn’t it?
Amazon has, in fact, already started offering loans to SMEs through the Amazon Marketplace. Payment companies such as Square and Paypal are also offering loans to businesses. Square Capital has already offered $1 billion in loans while Paypal Working Capital has provided over $200 million in loans. Apple and Google have ventured into payment through ApplePay and Google Wallet, respectively, and Facebook could well become a platform to auction loans to a pool of investors. In fact, Facebook has recently got an e-money license to offer financial services in Europe.
What Next for Incumbent Lenders?
The plot just thickened for incumbents. Given this disruptive revolution taking place around them, it’s time for banks and established lenders to really up their game. As alternative lending becomes mainstream, the competitive edge is with those who can enter the market quickly and capture market share.
What can existing lenders do? Shift from legacy technology to flexible and robust cloud technology.
The need of the hour is a robust technology platform that can help launch innovative lending products quickly. Click here to learn how banks and traditional lenders can quickly deploy an online business and rapidly bring versatile new lending products to market.
Cloud Lending Solutions is also hosting a webinar Jan 27, 2016, on how lenders can leverage cloud-based marketplace lending solutions to launch a platform in just 90 days! You can register here to learn more!