Digital Lending - Thematic Research

This report discusses the disruptive potential of digital lending in consumer financial services. It identifies key technology, macroeconomic, and regulatory trends. It then looks at how consumer openness to digital lending varies by product and provider in five key markets (the UK, the US, Hong Kong, Spain, and Australia), providing market shares for incumbents across credit cards, personal loans, and residential mortgages in those same markets. Analysis includes a timeline of how the theme has developed, key M&A activity, and firm-level analysis of which providers - both incumbents and new entrants - are best positioned to succeed as the theme evolves.

Incumbent retail banks exerted an effective monopoly on lending for centuries. Today, there is a dizzying array of highly specialized, non-traditional providers leveraging advantages in technology to erode the market share of traditional banks - especially in unsecured lending - by combining speed, convenience, and superior customer service. The COVID-19 pandemic has enlarged market potential further, as so many otherwise creditworthy customers were deemed uncreditworthy overnight. Using digitally native solutions, leading digital lenders managed to augment existing solutions quickly, deliver more insight and automation across the entire lending value chain, and partner promiscuously to bring new sources of value to customers in times of need.

Scope

• Across all assessed markets, outstanding credit card balances declined from 2018 to 2020, testament largely to the growth of buy now pay later products.
• The impact of new digital entrants in the US can be felt clearly from the encroach of Rocket Mortgage, which increased its market share by 4% in 2020 alone, with Wells Fargo down 2%.
• Overall, UK consumers are the most open to digital lending, insofar as “preference for branch” when arranging money is the lowest of all countries included while “preference for mobile and online” is among the highest.

Reasons to Buy

• Understand key technology, macroeconomic, and regulatory trends impacting digital lending.
• Access the latest consumer survey data on evolving channel behavior, provider preferences, and product holdings for digital lending.
• Identify leading digital transformation efforts based on cost/income and customer satisfaction metrics.
• Access firm-level insight on leading players within the digital lending theme.