2020 has been a year of uncertainty for every business. For financial institutions, marketers, and everyday consumers, 2020 has presented challenges that are simply unprecedented. As we entered 2021, in the post pandemic world, lending has changed and evolved. Lenders are looking at an era of unprecedented uncertainty in lending, as potential write-offs loom and the effects of a low-interest rate environment inhibit profitability.
Here is the list of major trends in commercial Lending in 2021 and let’s find out how lenders can adapt to those changes.
Lending Outlook 2021: the road ahead
1)Drop in Refinancing
2)Slow Recovery Rate
3)Drop in Qualified Borrowers
4)Auto Financing will be stronger
5)Fintech Lenders will attract more loans
Let’s see the trends in detail:
Drop in Refinancing: Refinancing are projected to drop by 46%. Low mortgage rates will drive a shift towards refinancing.
Slow Recovery Rate: Pandemic has created a destructive economy with business shuts and job losses. This scenario led to a slower recovery rate in consumer lending business.
Drop in qualified borrowers: Qualified borrowers could be hard to come. Given the current state of the economy, while demand for consumer loans should stay high, the quality of eligible consumer loans might not.
Stronger Auto Financing Sector: Auto loans remain a source of high-quality loans. Sales of new cars rebounded somewhat in 2020 and that rebound will continue to influence the sales picture over the next few years.
Strong Fintech Sector: Fintech lenders will attract more—and better—loans. Not only are fintech lenders increasing their market share, but they are also moving up credit tiers and going mainstream. As consumers go online first to find the best offers, marketplace lending is gaining in popularity and fintech lenders are consuming more of the loans that credit unions want and need.
So, How Lenders can stay ahead of changing trends in commercial lending?
Areas lenders need to focus on 2021 to stay ahead
2020 was certainly a year for the record books with a global health crisis that forced economic impacts across the globe. As we now approach 2021, financial institutions are looking at an era of unprecedented uncertainty in lending, as potential write-offs loom and the effects of a low-interest rate environment inhibit profitability. However, the year ahead also reveals some unique opportunities for financial institutions. To compete, you need to create a competitive advantage for your lending products and meet consumers where they are (online). Transparency, flexibility, peace-of-mind — now is the time to provide value that goes beyond just a competitive rate. Give consumers a reason to choose your loan.
Branchless Digital Natives: Much of the allure of online lending lies in the speed and transparency of the end-to end process. Self-service tools and options make it possible for consumers to keep tabs on the status of a loan application, while also cutting resource costs for institutions. Branchless digital natives have digitized the end-to-end lending process, gaining significant efficiencies from automation. As firms face the imminent challenges of 2021, realizing cost savings through digital efficiencies should be a top priority.
Digital Adoption: Firms will need to focus more on strategic adoption of digital assets, reaching toward end-to-end digitization, rather than the piecemeal addons that marked early approaches. End-to-end digitization relies on automated workflows and a single source of data to connect front and back office operations. Instances of repetitive or non-value-added work are reduced in favor of real-time processing. With real-time processing, financial institutions gain immediate access to data and insights, empowering a faster lending lifecycle.
Open Banking : Cloud-based APIs are at the heart of fast and efficient digital transformation strategies. Adoption of cloud-based APIs will usher in a new era of open banking and opportunities for future expansion into a broader ecosystem, where financial institutions can explore offerings and consume them at speed.
Covid-19 had a widespread impact across the global economy. To stay ahead of changing trends in commercial lending, firms must stay focused on speed, agility and efficiency to make it through 2021.
