The finance industry is going through rapid changes. The banking industry of today is very different from the industry that was there a decade ago. In the past, most banks were mostly focused about growing their physical presence. Today, most banks around the world have halted their physical growth. Instead, they are focusing their growth to the internet. In fact, there are new online-only banks that have come up and are taking market share. Think of a Marcus, the digital version of Goldman Sachs. Marcus was started a few years ago and has managed to grow its total deposits to more than $60 billion. In this article, we will look at the key loan trends to watch.
Low Interest Rates
Global central banks brought interest rates to zero after the past financial crisis. The goal of this was to spur borrowing, which would in turn lead to a faster economic growth. To a large extent, this growth has happened and the wealth of people, especially in developed countries, has increased. Theoretically, interest rates should rise as the economy recovers. However, this will not happen. As you recall, the Federal Reserve raised rates three times in 2018. This led to a decline in stocks. When it slashed rates three times in 2018, stocks rose. Therefore, there is a likelihood that central banks will leave rates unchanged.
More Online Lenders
The financial industry will continue to see the entry of more companies. This competition will come mostly from companies that are funded by venture capital. In the past few years, we have seen companies like Credible come into the business and do very well. We have also seen many online-only banks like revolut, Prosper Marketplace, and N26 continue growing in the industry. Most importantly, we will see traditional companies enter the industry. This will be a continuation of what we have seen before when companies like Goldman Sachs and Google have moved to the industry. Also, we will see existing companies like Tunaiku Androidand Tunaiku iOScontinue their growth. Also, we have also seen many companies start offering cryptocurrency loans.
Credit Score Diversification
A credit score is one of the most important things in finance. It is a number that tells lenders whether they should lend money or not. They also help lenders decide the amount of money they can lend to people. However, the impact of credit scores has been criticized before. This is because some good people are passed by because they have a weak score. A number of companies are trying to change this. Some companies are considering other information before they give out money. For example, they are considering the education background of a borrower and where they work. In 2020, we will likely see more innovation about this.
Consumer credit is increasing around the world. In the United States, consumers owe tens of trillions of dollars. The total student loans alone are worth more than a trillion dollars. As such, as technology increases, we will see increased innovation and entry of more companies into the sector.