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COVID-19 has already given major hardships to online consumer lending platforms. Loan comparison services such as Monevo have reported a significant drop in the percentage of online personal loan demands since the coronavirus outbreak. When considering COVID-19’s negative impact on digital loan platforms, is it plausible to expect the coronavirus to have severe and far-reaching effects on global consumer lending?
Self-isolation and other safety measures focused on preventing the spread of coronavirus have forced consumers to change their financial plans. For many, getting loans as a means of financial support doesn’t seem to be a viable solution at the moment. Simply put, taking out a loan appears very dicey.
Also, many online lenders have significantly raised their lending criteria and some of them refuse lending to self-employed consumers. Coronavirus outbreak has made many lenders only grant loans to consumers who work in sectors that are considered safe. As a means of aiding their customers, online lenders like SoFi and Lending Club have created coronavirus-related news and important updates sections on their websites.
On the other hand, according to Iupana, FinTech personal loan demands saw an improbable rise in Latin America. In addition, global FinTech adoption has seen a notable 72% increase from COVID-19. Therefore, it seems that the possible impact of coronavirus on digital loan platforms and FinTech largely depends on whether certain countries — and their citizens — consider FinTech a feasible business tool during the pandemic.
As face-to-face interactions are largely avoided throughout the world, some banks embraced the possibilities provided by FinTech. Namely, digital lending proved as a convenient way for certain banks to proceed with their lending as usual. According to Numerated, digital lending solutions are likely to provide banks with a competitive advantage over the banks that refrain from the adoption of FinTech in the current situation.
According to Business Insider, consumer lending already faces significant difficulties thanks to the coronavirus pandemic. The lockdown has caused credit card spendings to tank 40 percent and retail loan growth is expected. Moreover, the consumer lending sector is likely to face difficulties soon, similar to those of airlines and food delivery businesses.
As consumer and P2P lending is essentially linked to consumers’ financial status, every major setback in any business sector has negative effects on the consumer lending business. Having that in mind, it may be compelling to reflect on what the fallout would be on consumer lending if the gloomy predictions for startups come true.
Another factor that can greatly affect the well-being of consumer lending is the situation with the stock market. Considering COVID-19’s impact on global markets’ stability, many investors need to figure out whether it’s a good time to invest. However, in comparison with previous epidemics, there’s reason to think global financial markets will successfully cope with adversity and regain balance.
The consequences of COVID-19 are yet to be seen, so it’s hard to predict any particular outcome concerning the global status of consumer lending. However, at this point, the general reluctance to give and take out loans will likely hurt both digital and traditional lending platforms.
Do you think that COVID-19 will have a much more severe impact on consumer lending than previous pandemics? Can the adoption of FinTech solutions better the status of consumer lending? Please let us know in the comments below.
Image courtesy of Pixabay.