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The Future of Online Lending

Today’s market of online lending business in the UK is facing an explosive rise. In this article, we study this situation to discover that it reflects an emerging global trend.

Banks are adopting the internet at a high pace. According to PricewaterhouseCoopers research, by 2015 more people will interact with their banks digitally than through branches. This August, 423.5 million users globally have accessed online banking sites. 37.8 percent of the European web users access online banking services.

UK banks are more than successful in mastering the online channel: Coredata research has shown that 90% of UK bank customers are satisfied with their bank's online services.

Yet, lending by the major UK banks and building societies fell by Ј4 billion in the first quarter of 2012, which is the biggest drop since March 2010, – says a recent report released by the Bank of England.

This trend is easily explained by a rapid acceptance and successful development of the online lending mechanism. Consumers can instantly get a loan from a non-banking organization or turn to the peer-to-peer lending communities for help. Alex Gowar, marketing director at one of the most popular peer-to-peer lending platforms RateSetter, says: "We have seen a change in consumer behaviour: rather than picking up the phone to their bank manager, borrowers are more inclined to shop around online and see if they can get a better deal, or indeed avoid a bank altogether."

Online lending service providers and communities are not new to the lending market. While there is no public data available for the private online lending services, the largest UK peer-to-peer communities Zopa, RateSetter and Funding Circle have already lent GBP 218 million, GBP 29 million and GBP 41 million respectively.

Advanced real-time analytical technologies empower these companies to acquire reliable and profitable accounts, and render automatic underwriting decisions.

Having embraced the online lending mechanism today, the financial institutions will find themselves among the leaders in the quickly changing landscape of the financial services in digital world.


Comments: (2)

A Finextra member
A Finextra member 03 December, 2012, 11:34Be the first to give this comment the thumbs up 0 likes

Peer-to-peer lenders such as Zopa have a distinct advantage over banks as they have been built from the ground up to be operationally efficient, with a heavy reliance on streamlined automated processes and technology. As a result, they’re able to advertise interest rates that are significantly more attractive to both lenders and borrowers.

It’s also worth remembering that consumer sentiment as a whole towards the banking industry is at an all time low, especially in markets such as the UK, which has only further bolstered the appeal of players such as Zopa.

It would be nice to believe that players such as Zopa have benefited solely based on the attractiveness of their interest rates, however I suspect that many lenders and borrowers alike would still have shifted over as a result of the reduced sentiment and general erosion of trust with the banking sector.

A Finextra member
A Finextra member 04 December, 2012, 12:23Be the first to give this comment the thumbs up 0 likes

Your comment is reasonable. Still, customers expect banks to tie all the channels together. This is one of the findings of a survey conducted by Davies Hickman Partners Ltd in the US, UK, Spain and Germany.

Study also shows that even though almost three quarters (73%) of customers see local branches as a vital link to their bank,
the average number of channels used to purchase a product is 2.9. (more findings:

Thanks for the insightful comment!

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