From the automation of traditional processes to the creation of 100%-digital business models, digitalisation is transforming the economy, especially financial services.
These services feature the digital lending model, which began in 2005 with the P2P start-ups, and which has also become a very attractive market for banking and other financial entities. According to the study by Autonomous, the estimated European market represents a volume of $150b in loan creation and $450b in outstanding loans, and still has room for growth before it can reach the levels of the American and Asian markets.
Moreover, annual investment in the sector varies from $500m to $800m at a European level, with Great Britain, Germany and France the countries with the most investment.
It is a very interesting market, but it has also been subjected to growing competition, which has not played into the hands of the fintech companies. The digital lending model is based on low costs, and the elevated cost of capital reduces its margins and, consequently, its competitiveness.
In turn, this need to be more competitive has translated into improved efficiency in operations, especially in digital identification and KYC/AML processes, with solutions that reduce costs and improve the acquisition funnel.
In the Autonomous study we can see the impact of these identity verification solutions in the sector. For example, the income derived from the solutions for user identification and account opening is $2b globally, and it reduces KYC/AML costs derived from identity verification by between 40% and 70%.
For example, Mitek’s digital identity verification software reduces the time required to carry out credit ratings by 98% and the client onboarding time by 99% – in the case of Nocks, where onboarding was reduced from 12 hours to 5 minutes -.
In short, the study shows an increasingly attractive digital lending market, but at the same time growing competition. Consequently, within this market the improvement and optimisation of processes such as identity verification and onboarding will be strategically fundamental.