by Aidan Kang, CFA
Senior Writer
UPDATED: September 13, 2021

Almost all of us have encountered financial troubles once in our lives, and borrowing money from someone you know or a financial institution has somehow become a solution.

People constantly go through financial problems. The lending industry has progressed as the demands of the clients increased. This has resulted in lending trends that evolve every year. Of course, potential borrowers should be aware of these trends so that they can benefit from them.

Increasing Number of Unqualified Borrowers

Well, before approving your loan, lenders consider your job, financing, and other means of income to ensure that you can pay the minimum monthly loan payments.

Because of the COVID-19 pandemic, unemployment and job rotations made people unqualified for loans, prompting loan companies to do their best to reduce lending risks. Consequently, job verification will be a strict procedure when screening the applicants.

So, there’ll be a continued increase in the number of unqualified borrowers unless the COVID-19 vaccine is widely distributed, allowing displaced workers to return to their former posts.

Nearing End for Payday Loans

Payday loans are easy to access. In fact, there are only a few reasons you would get denied for a payday loan.

However, payday loans are risky because of the extremely high-interest rates that could trap borrowers in an endless cycle of financial troubles. That's why many are opting for another alternative that could somehow replace risky payday loans.

The good thing is that the alternatives will take over soon. Consequently, the volume of payday loans will eventually decline as a new one emerges.

It can be hard to profit from a small loan amount because it’s so expensive to underwrite loans today. But making money is more convenient with a bigger loan amount since the cost of underwriting is the same.

Now, because there’s so much available data from alternative sources like employers and payroll services, low-amount loans can be easily automated, allowing borrowers to avoid risky payday loans. 


New development of digital financial systems has been introduced as a fruit of technological advancements, allowing anyone to access financial services conveniently.

In fact, you can now submit personal loan applications by swiping on smartphones, thanks to the digital revolution. In addition, banks and financial institutions will be able to speed up their operations due to digitization. 

Digitization has made it easier to approve loans or payments, making digitized lending popular among consumers and businesses.

It's forecasted that the market will be driven by large-scale digitization. Also, the widespread acceptance of digitization in lending processes will prompt another era for the lending industry.

Better Credit Scoring System

Traditional banks' current scoring system has flaws, like extensive documentation, high-interest rates, and slow approval. That's why many think that alternative credit scoring systems should be available.  

Telecommunications companies and utilities, for example, can now be the alternate data sources. Travel, e-commerce, government transactions, and asset holdings are some of the other sources for these data. 

The alternate data can enable a comprehensive evaluation of a borrower's credit risk profile by displaying a person's habits and preferences. This can now be used to assess a person's risk level without a credit history. 

Also, this fresh approach aims to reduce risk by enhancing the sensitivity of data collection, promoting added convenience to all applicants who used to have a hard time qualifying for some types of loans. 

AI and Machine Learning

Investing in AI and machine learning could be the most effective way to cut costs and improve lending processes.

Lending services have become faster owing to artificial intelligence and automation. Loans that are usually processed for weeks can now be approved and deposited in a single day.

Furthermore, artificial intelligence fraud detection and prevention tools can also address security problems, ensuring safer practices in every transaction. Also, data intelligence and advanced analytics assist institutions in analyzing customer needs to provide them with possibly the best solutions. 

More Partnerships with Fintechs and Tech Companies

The main goal of financial technology is to provide consumers with easy and convenient access to information, as well as more possibilities for improving the financial industry's services. In short, lenders will partner with fintech and technology companies to meet excellent customer support and convenience.

For example, in the financial industry, blockchain is one of the most popular technologies. Basically, it assists in resolving the issues that most consumers face in the industry, particularly in the lending sector, such as security concerns and access to payment options. 

The significant increase in customers is due to the rise of fintech lenders. Of course, it's expected that as the number of fintech lenders grows, so will the number of consumers. Today, with the pressures of innovative technology and rising customer expectations, traditional lending has slowly become outmoded.

Final Thoughts

The lending industry has clearly shown no signs of slowing down when it comes to improving its services. As technology continues to advance, the lending landscape is always expected to follow suit.