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The traditional lending industry has been upended by rapid technological advancements in recent years. Conventional systems of short-term loan provisions are no longer the go-to option for customers. The UK remains the epicentre of the FinTech – financial technology- industry. This dynamic and disruptive technology continues to reshape the financial sector in many ways. The Internet of things has resulted in an upheaval of credit markets, with traditional bricks and mortar exchanges giving way to the online loans sector. The rate of change is unprecedented. Today, personal and business loans, short-term loan online applications, and other lines of credit are being processed through Internet lenders.
The industry was born from the ashes of the global financial crisis in 2007/2008. The disruption caused by the failure of traditional banking systems gave rise to a FinTech boom that resulted in cost-effective online channels for conducting financial transactions. Banks were failing in their droves; increasingly stringent regulation, mounds of bureaucracy, and a cynicism never before seen brought the financial sector to a virtual standstill. Yet, personal and business needs for lines of credit continued. Large swathes of the UK population were being refused credit by traditional banks turned to FinTech for assistance.
Initially, banks dominated the credit markets, but today a range of FCA regulated online lenders has come into their own. The UK is home to a burgeoning and robust market of instant cash loans , many of which offer their services to clients online. Innovation and technology have contributed to a sharp rise in online lending over the years.
The value of the payday loan industry is valued at around £220 million, according to figures from 2016/17 with around 760,000 payday loan borrowers in 2017 . Billions of pounds have been issued in lines of credit since 2007, and this trend is likely to continue moving forward. The rapid growth of the online lending sector comprises personal and business loans. A small but viable component of this credit market is short-term loan online applications, for people seeking additional credit between paycheques. Consumer lending through banks has increased in nominal numbers, however the actual amounts loaned to individual clients has been cut down owing to stringent lending requirements. With online loans providers, there is far more flexibility and greater loan provision when it comes to comparing payday loans.
It’s a case of supply and demand. Customers were demanding access to credit markets and banks were turning many people away. Many under-banked people in the UK live from one paycheque to the next. At times, problems arise and additional funds are needed to tide households through. The demand for capital began to grow, and banks’ inaction led to the rise of FinTech Enterprises willing to fill that void. It is not so much the inability of banks to provide credit to the market as much as it is the regulation, inefficiencies, delays and strict requirements associated with bank lines of credit. The archaic system that banks rely upon is not conducive to high demand for instant cash loans in UK society. Online lending is one of the most innovative, cutting-edge means of accessing financial markets.
Time is money, and delays in application processes, approval processes, and money transfer processes can make the difference between staying afloat or drowning. People simply cannot afford to wait days or weeks for banks to approve and transfer funds from loan requests. Instead, online loan providers can process an application within minutes, and transfer funds direct to a customer’s bank account within the same day. Of course, there is a premium to be paid for this privilege, and that’s why the short-term online loan industry is thriving.
Borrowers want to know whether they qualify for an instant loan, and if they do when they can get their money. While banks rely on credit scores, many online lenders will use a myriad of facts to determine whether the borrower qualifies for the loan. The employment status of the individual, the credit score, and other elements can be taken into consideration.
It is crystal clear that rapid advancements in technology have resulted in dramatic changes to the traditional lending sector. Online lending has come into its own, and what once began as a niche market, now has mainstream appeal.
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