Digital lending has exploded in popularity in the last few years, especially in its largest market—North America. The market size of digital lending is expected to reach $20.5 billion by the year 2026, with a 13.8% compound annual growth (CAG) rate during the forecasted period. For a market already valued at $10.7 billion, this level of growth is extraordinarily impressive and indicative of a change in the economy as a whole.
A number of contributing factors aligned perfectly for digital lending to become as massive as it has, and it's important for financial institutions to understand what they are. This will help plan for the future and justify moving toward a more tech-based approach to financing.
Today, we are going to cover:
- Why digital lending has grown so much
- The benefits of digital lending growth
- How lenders can improve their digital offerings
Why Has Digital Lending Grown So Quickly?
The changes in the way consumers shop that contributed most to digital lending growth are:
- A rise in online shopping due to the COVID-19 pandemic
- Increased interest in consumer financing
- Better banking as a service (BaaS) technology
Online Shopping During COVID-19 Pandemic
As everyone in the world already knows, the way consumers shop has shifted dramatically in favor of online stores and apps. The largest contributing factor to this shift was the COVID-19 pandemic which led to consumers being unable to shop in person. This made them more comfortable purchasing everything online and more savvy at navigating online reviews and videos to get the information they needed on the products they were interested in.
Increased Interest in Consumer Financing
The other change that came alongside the pandemic was a massive fluctuation in buying power as governments kept their citizens home from work for periods of time and subsequently provided pretty significant cash influxes to them through stimulus packages and other aid programs. As a result, buyers became more interested in merchants with lending partners that could help them break their purchases up to compensate for rapid shifts in their disposable income.
Another shift that led to more reliance on consumer financing was a noticeable increase in premium home goods and appliance sales. While stuck at home and given some extra money to play with, many consumers took the opportunity to improve their homes with expensive furniture, appliances, and consumer electronics. Conveniently, these were some of the first industries to leverage newer market trends like digital lending.
Better BaaS Technology
As consumers made digital lending and BaaS more lucrative, financial institutions and their fintech counterparts were able to invest in better digital products. Utilizing newer tech trends like artificial intelligence (AI), machine learning, cloud banking, and the blockchain, fintechs and banks were able to craft better and more convenient offers for consumers, making it easier for consumers to find the right provider.
Benefits of Digital Lending Growth
As a result of all of these factors, digital lending growth has exploded, leading to a more convenient and flexible online shopping experience for consumers. To many ecommerce experts, the past few years have been viewed as just the financial and technological boost digital lending needed in order to reach its potential.
The benefits of this taking place include:
- More flexible and affordable payment options for consumers.
- Faster and more personalized checkout experiences.
- Cleaner and more efficient merchant and lender websites and apps.
- More conversion for lenders that offer embedded financing on merchant sites and apps.
- A more even playing field for small businesses looking to compete with retail giants.
The question is, how can lenders improve their presence in this market to take advantage of digital lending growth?
Leverage Digital Lending Growth With Skeps
Skeps offers a comprehensive, end-to-end consumer financing platform that helps businesses modernize their entire payment process. Working with an entire network of established lenders, we go above and beyond one-click payment, also offering a one-click application process for several different types of consumer financing, including:
- Installment financing payment plans
- Store credit cards
- Consumer loans and leases
If you’re looking to partner with a forward-thinking fintech company that will get your financial products in front of as many consumers as possible, Skeps is the perfect fit.