How pandemic changed the Digital Lending space

March 11, 2021

Digitization has been the cornerstone of “board room” deliberations, strategic multi-year plans and market readiness discussions at organizations globally for the last few years. Digital adoption however was slower than anticipated and lagged behind the most optimistic of forecasts until the pandemic enforced a generational shift to Digital adoption. Going “digital” was the only option for peer to peer engagement, shopping, banking, trading and working during the better part of 2020. “You never know how strong you are till being strong is the only option you have” – this played out very aptly during the pandemic.

Banks and financial lenders were no exception during this unprecedented period. The increasing demand for loans and payment deferral caught the banks and lenders underprepared. This re-emphasized the need for the readiness of digital processes and advanced analytics as critical attributes for building resilience and scale. The adoption of alternative credit scoring across the lending industry witnessed a significant spike as traditional bureau scores were viewed as losing some relevance in the pandemic induced moratoriums. Alternate data-driven scoring frameworks in their ideal definition are expected to complement the existing traditional frameworks and help deliver incremental predictive power. The need, relevance and contribution of these alternate data-based scores have statistically increased to align with these changes and bring an adequate balance in the models.


2021 will witness a renewed shift to technology-enabled remote engagement trends, smartphones will be more pervasive, banking and financial services will cross the hurdles of “security, accessibility, last-mile connectivity” to reach out to more underserved segments.

Buy Now Pay Later trends will alter the credit uptake landscape. Credit Cards will continue to face stiff competition from this digitally oriented, alternate data-based scoring product that facilitates credit for smaller ticket size and short duration loans. Data Privacy, data residency, data sharing and eventual data monetization will take centre stage opening up multiple opportunities for players that handle client data ethically and responsibly.

The development of data, analytics and digital technology has educated customers on the ease of making purchases online, a habit that has been adopted by many. What is required of a borrower in a post-pandemic world is a seamless experience from application to close. A user-friendly interface, cloud integration and alternative credit scoring techniques will result in quick initial decision-making processes.

The widespread use of AI and machine learning (ML) algorithms that have been implemented by fintech companies in the industry were initially viewed as a threat to the well-established legacy banking systems across the globe. But today we are seeing a new trend of synergy between the conventional financial institutions and the fintech players. A strong collaboration between Financial Players and Fintech aspirants will allow for the creation of more personalised services, data monetisation, and interconnected internal system, streamlined processes, innovative communities and ultimately the rise of an alternative approach to financing and credit assessment.

The use of alternative data in providing credit to the masses will gain precedence as the market gets flooded with unconventional credit aspirants. For example, Gen-Z represents 40% of the workforce in 2020, suggesting that 2021 will see a rise of aspiration lifestyle-driven and consumerism fuelled financial digital transactions. Technological innovations and the adoption of disruptive trends will bring to the fore another year of evolution for the Banking Financial Services industry and in particular the Digital Lending ecosystem.

This article originally appeared in ciol.com