Over the years with the development in science and technology everything has gone digital. Now you can purchase anything and everything lazing on your sofa and have it delivered at your door step in no time. Whether it is clothing or any fashion accessory, air ticket or a pass to a concert, groceries or medicine and even money! Yes, you can now deposit, transfer and borrow money from your home without having to move yourself an inch apart from your pointer finger on your mouse.
With digital lending available now, you can have money transferred to your bank account within 24 hours. Isn’t it impressive? Truly it is but there is a need to know about this digital money lending landscape as this specific segment is changing at a fast pace. Not only the money lending process is changing but there is also an inclusion of large number of online money lenders which makes it all the more important for you to be extra cautious.
Understanding the new trend
Online money lending services are a new type of socialplatform that will enable you to borrow or lend money directly. However, you will need to know a few things before you start using this useful platform. The things to know include and are not limited to:
- The dynamics of bidding
- The change of various attributes of loan requesting listingsover time
- The interest rate and
- The number of bids.
On closer look you will observethat there is driving behavior pattern especially in peer to peer lending and for most ofthe listingsthis number of bids received reach spikes at similar time points.
These phenomena can be explained with respect to the economic and social factors that typically all money lenders take into account. This is necessary to ensure that the money lenders make profits and tie it with their bidding preferences.
You can also come to know about these from the model based on the temporal advancement of the biddingthat dependably predicts the achievement of a loan invitation listingas well as the fact whether or not a loan will be paid back.
The digital lending scenario
There are lots of online money lenders you will come across such as liberty lending USAand even Amazon that have been helping people with the money they need. The digital money lending scenario is fledging at a rapid pace as the following stats indicate:
- Research reports and statistics show that last yearAmazon created headlines when it gave away $1 billion in loans to over 20,000 small business merchants in the United States, UK and Japan.
- We Chat, the largest social network of China, also created a buzz when it entered into the scene in 2015 and deployed more than $14.7 billion in loans in just two years.
This shows the success of this digital lending platform and the safe and secure nature of money lending. Money lenders can now have near real-time data of the person or business wishing to borrow money. They can access the data and read the customer reviews of the business or the credit score of the individual evaluate the worth of a customer and the risk factors associated in lending a person or a small merchant. This offers convenience to both lender and borrower and efficiency of the lender. Ideally, online loan applications take surprisingly less than 0.3 seconds to get approved.
Expansion of the ecosystem
The digital lending ecosystem is continually expanding and there are a lot of small and big money lenders joining these tech giants. The ecosystem is continually evolving as well whether it is in Mexico or Mombasa, Kenya or Kuwait.
- Each digital lending platform in this space clouts technology to make sure that the loans offered are faster, more straightforward and more cost-efficientfor the customer.
- Digital lending is becoming the most potent force for reaching out to people who may not have the opportunity to access any financial services in the past.
- It provides innovative products and can easily overcome the challenges of geography, increase transparency and reduce transaction costs.
It has a wide variety of lending models designed on the basis of distinct market structures, customer needs as well as the regulatory environments.
The different lending models
All these different lending models are capable enough to tackle with the financial inclusions in many different ways. According to the evaluation of the current state of play there are seven primary digital lending models identified such as:
- Online lenders: These are lenders that offer full end-to-end digital lending products. You can even apply for these via mobile applications. There is no face to face contact or calls made to a call center for customer acquisition, engagement and loan distribution
- P2P platforms: Peer to Peer or P2P platform is digital platforms that will match you with an institutional or individual lender. They will facilitate the transactiontypically playing an ongoing central role acting as a conduit between two parties.
- E-commerce and social platforms: These platforms are those where money lending is not their core business such as Amazon but also leverage digital distribution, rich customer data, and strong brandto offer credit products to thecustomers
- Marketplace platforms: These are digital platforms that use proprietary algorithms to match you with a perfect lender. When the fund is dispersed the customer relationship is directly with the lender.
- Supply chain lender: They provide short-term working capital credits for microenterprises for buying inventory from their distributors. This is a pay-as-you-go financing where the distribution network enforces payment through penalties if required such as withholding deliveries or turning off utilities.
- Mobile money lenders: They partner with mobile network operators to offer loans to the customer base using credit scoring and mobile phone data. To supplement the digital interface there are physical agent networks where you can go for cash-in or cash-out transactions.
- Tech-enabled lenders: They are traditional lenders that embraced technology to upgrade their otherwise manual lending process to ‘tech and touch’ approach.
The digital lending ecosystem is dynamic in nature making strict categorization difficult. However, key players continue testing and refining their business models.