Lending trends for 2023 – what to expect

By
inGain team
January 19, 2023
5 minute read

Fintech news has frequently dominated tech industry headlines in 2022, and not always for great reasons. Companies in this sector experienced decreases in funding, a valuation bubble, and widespread layoffs that reverberated across the broader industry. However most companies associated with the lending industry, with a few notable exceptions, have managed to emerge from the rubble unscathed.

Much of last year’s trends, which helped pull the lending industry through the global pandemic, geopolitical challenges, and historically high inflation, will continue to advance both existing and new businesses. Lending companies will continue digitalisation and expand their presence online. Artificial intelligence and alternative lending will become an increasingly integral part of the business ecosystem. Nonetheless, there are several new lending trends to watch out for in 2023

From on-premise to SaaS

We’ve previously written about the differences between on-premise and SaaS loan management systems, and the move toward SaaS solutions looks to be an industry-wide trend. In fact, Gartner predicts a 16.8% for SaaS in the coming year alone. We expect to see nothing less in the lending sector as well.

Developing a cloud-based SaaS solution requires a highly-skilled team, and in a tight job market, recruiting could prove difficult. On the other hand, businesses that switch from an on-premise solution to an outsourced SaaS one can save both time and money. Using another company’s cloud-based system can allow a lending company to free up resources that would otherwise be spent on an in-house IT team.

All-encompassing automation

Lending businesses are no longer simply looking to ‘go digital’ with individual processes in their company. They’re looking for complete, end-to-end automation that will allow them to grow and scale their business. Even in markets where in-person services are still favoured or physical documentation is required for legal compliance, full lending lifecycle automation is still the key for expansion.

Tailored tech services and artificial intelligence (AI) are two trends that already play a big role in lending automation, and we’re confidently predicting an upward trajectory for the year ahead. Alternative lending companies are continually expanding the industry and developing completely new products and services – and they need the tech to deploy them. AI, powered by machine learning and big data, can work within a customised, automated system to enable fast time to market and product testing.

Ease of embedded finance

While the rate of lending slowed for traditional banking institutions since the beginning of the pandemic, neobanks and non-banking financial institutions (NBFIs) have spurred on the rise of embedded finance. The trend isn’t new – in 2021 Oracle predicted that the sector will be worth over $7 trillion in the following ten years, which was twice the combined value of the world’s top 30 banks at the time. Two fast-growing leaders in this sector are buy now, pay later (BNPL) and just-in-time (JIT) financing.

Embedded finance reflects a broader trend of streamlining the user experience. Customers no longer are forced to go to third party websites or fill out tedious amounts of paperwork to access their digital wallets or receive financing for their needs. As a result, businesses are coming to expect that all of the programmes and services they need can automatically communicate via an application programming interface (API).

Legislating new limitations

Many aspects of financial technology services are developing faster than the countries impacted by them can come up with legislation, but this year the lawmakers are doing their best to catch up. The main targets are customer protection and targeting illegal lending practices. Most fintech startups operate with the ‘start locally, think globally’ strategy, and they need the technology that will enable this vision. In the lending industry, this means customisable technology that requires less time and money for adapting to new markets.

The enhanced scrutiny of tech companies, especially fintechs, has seen falling stock prices continue into 2023, leading many companies to put off potential IPOs. We’ve already seen an increase in partnerships between traditional and alternative financial institutions over the past years, but the declining valuations of fintech startups could see quite a few mergers and acquisitions in the coming year. Could this lead to the emergence of financial ‘super apps’ that can do it all? We predict that in 2023 both consumers and companies will come to expect a lot more from financial service technology, especially as lending continues to increase.

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For over 10 years FIS.solutions has been supporting the consumer finance industry, fintech companies, and banks with an out-of-the box, yet fully customisable loan management system. On top of the core system, the company also delivers system integration services and custom feature development. FIS.solutions has executed hundreds of projects with more than 50 global clients across a variety of sectors.

The loan management system caters to both secured and unsecured business and retail loans, including instalment loans, auto leasing, mortgages, line of credit, buy-now-pay-later, payday loans, invoice factoring and more.

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