Exploring consumer attitudes to digital finance

Recent research has revealed that consumers increasingly value personalisation, honesty and integrity ahead of speed and monthly cost when choosing a loan provider. 

There were some interesting themes emerging from Nostrum’s third annual report into consumer attitudes to digital finance, which was released this month and is titled ‘Personalisation in Digital Lending’. The research, which surveyed 2,000 adults, found transparency (84 per cent) is now second only to low interest rates (92 per cent) as the factor consumers consider to be most important element when sourcing a loan. The third most important factor is speed (73 per cent).

In recent years we’ve seen the lending industry become ever more influenced by the digitally-savvy consumer, and several factors now point towards an increasing preference for digital lending. Just 14 per cent of those surveyed could remember their last bank branch visit, while 53 per cent of those surveyed now use a mobile banking app.

People are now more willing to accept the role of social media data in loan decisions. 49 per cent of those surveyed aged 18-45 say they are open to the notion of lenders using social media as a means to make credit decisions. This represents a significant increase on the 40 per cent of the same age group who expressed a positive response to the same idea in 2014.

The challenge to banks and other lenders is not just to provide lending facilities digitally. To appeal to existing or potential customers they need to be honest, transparent and able to provide a personal experience, all with a competitively priced product.

Digital finance has arrived

The survey found general indifference to questions about technology in finance, which in previous years have bought stronger reactions. This in combination with the ubiquitous presence of smartphones and increasing market penetration of tablets and mobile banking apps confirms that consumers have stopped viewing digital lending as the future, and are increasingly comfortable accepting it as part of their day to day lives.

We see this as an opportunity and a threat for existing banks and lenders, as it makes potential market entry by some of the biggest tech and social brands ever more plausible and likely to succeed. The strength of the current consumer credit industry lies in experience but the market faces unprecedented change in the coming years, and technology has revolutionised the way consumers can be serviced. Whether one single company can meet these demands remains to be seen, but to compete the industry needs to take a long hard look at itself and not be afraid to completely rethink the way it operates.

The future certainly looks bright for digital lenders. There is market share still to be acquired from high street banks and if consumer affordability continues to be strong for the majority of 2016, if not all of it, retail point of sale finance operators could benefit from more spending on the high street.

Personalisation in digital lending

Creating a personal touch and operating in a way that resonates with the consumer’s own core values offers an opportunity to differentiate in an increasingly busy marketplace. Banks and FinTech innovators are likely to be pleased to see customers acknowledging the role social data can play in underwriting. This may represent a recognition that consumers acknowledge their personal data will need to be shared in order to receive a higher degree of customer experience. At the same time, it indicates that if the lender is deemed trustworthy, providing this data will not be a huge issue.

So what can we conclude from this research? It seems the perfect platform for innovation in digital finance to bloom has been set, building on increasing confidence in digital transactions and demand for credit of all varieties.