The lending market has been ripe for disruption for some time - and now COVID-19 has exposed the laggards, brought innovators to the fore, and accelerated trends that were already in motion. The global pandemic also highlights just how important lending is – it is critical to keep the economy going - and how lenders need to be responsive in a crisis. Disrupters are making existing processes better (or revamping/replacing them altogether), creating new business models, and targeting new customer segments. In these unprecedented times, traditional lenders need to respond and future-proof their business. Maintaining the status quo is not an option.
On the demand side, consumers now have higher expectations of their lenders. After months of lockdown and moving their lives online, consumers expect the same convenience from their lenders as they get with Amazon, Netflix or Zoom. The user experience should be slick, decisions quick, and delivery instant. As banks respond to the disruption in the lending market, and learn from the fintech companies that do this better, they will also have to adjust to the new normal of working remotely. All banks have had massive increases in customer queries as the effects of the pandemic have taken hold. In the UK, for example, the government introduced measures that meant individuals could take a payment holiday of up to six months on their mortgages and other personal finance products. Lenders were inundated with requests, and some found their legacy systems creaking at the seams.
While some lenders have struggled, the pandemic is also providing opportunities for nimble plays. Fintech company Kabbage, for example, created a gift certificate programme to help small businesses with their cash flow to tide them over through the worst of the pandemic. Businesses can sell gift certificates through Kabbage Payments, which can be redeemed at any time, with the funds deposited in their accounts the next working day. Last year Kabbage announced a tie-up with Facebook so that businesses could get a wider audience for their certificates by listing them on the social media platform.
Download your copy of this Finextra white paper, produced in association with FIS, to learn more.