Traditional banks still hold the majority of the market when it comes to consumer and business loans but global Fintech or “alternative loans” are quickly gaining ground.
Global Fintech lending is currently worth over 267 billion and growing, over 181 billion in 2017. The demand is growing and a lot of that is thanks to the lean nature of Fintech lending platforms. They do away with much of the bulk that is built into big established financial institutions. For instance, Fintech platforms pair borrowers and lenders through powerful algorithms that analyze user data and assess hundreds of risk factors. This means risk assessments are more accurate and can be reached in minutes, not days. That lean nature also means they can charge more favorable rates to borrowers compared to the more traditional lender.
This appeals to tech savvy business owners in developed nations like the US, but what is driving a lot of Fintech lending is actually in emerging markets. According to World Bank, an estimated 1.7 billion people in the world still don’t have access to traditional banking. That means millions of business owners and would-be entrepreneurs in important emerging markets like India, Bangladesh, and Mexico don’t have access to traditional credit. The need is obviously real and reflected in the growth of the industry.
The financial opportunity in lending to millions of businesses is great, but this movement proves to me that we are truly a global market. The ability to have an idea and create an entire business around it is no longer exclusive to developed nations. The fact that many more people will have the opportunity to grow their dreams resonates with my own entrepreneurial spirit. I believe we’ll be seeing more innovative ideas from the unlikeliest of places and I can’t wait.