There’s an old adage from Greek philosophy that ‘change is the only constant’. If that’s the case, change in recent times has been very constant in the lending sector, and in so many different ways. We’ve seen step changes in technology, customer demands and regulation, as well as a transformation of the social and economic contexts that shape our expectations.
As a company specialising in both compliance and technology, myself and the team at Lenvi find ourselves in the privileged position of being at the heart of this disruption, observing the impact both on our clients and their customers. We’re always looking out for market trends and patterns, and I wanted to use this blog to share some of our current observations.
Let’s start by going back to change – and, in particular, the impact on consumers. Clearly, the cost-of-living crisis has both ramped up the demand for loan finance and the risk of vulnerable customers slipping into difficulties. But the lasting impact of the pandemic crisis has also had another impact that is not discussed as frequently outside lending circles, namely that consumer demographics are now a lot less predictable.
Many people’s lives have change dramatically in recent years. Some high earners have lost their livelihoods, others have been caught out by the sharp rise in energy costs and mortgage repayments, and many who would not previously have been considered a credit risk have been struggling to pay their bills. At the same time, many of those who were already squeezed financially have had an extraordinarily difficult time.
This has led some consumers to seek out new sources of credit, such as second charge mortgages and buy-now-pay-later purchases – and further innovation is in demand in these areas. Also, as lenders will be very well aware, growing consumer vulnerability has led to a tightening of industry regulation, building to the roll-out of Consumer Duty which launched on 31 July, requiring loan providers to prove that they are “acting to deliver good outcomes for consumers” at all times.
And this shift is not just being enforced externally. Just as we have seen the growing prominence of ESG on the boardroom agenda, so too are we seeing many financial services companies thinking carefully about the ethical dimensions of their relationships with communities and stakeholders.
Yet the picture is complicated because, at the same time, it is now of course much easier to borrow. Very little of the old social stigma around credit remains, and a proliferation of friction-free, digital lending and credit brands have raised consumer expectations of convenience and quick results.
Throw into the mix the pandemic crisis and rising interest rates and it’s small wonder that many lenders have taken a step back in recent years, embracing a more cautious approach; reviewing and, in some cases, withdrawing products. However, I believe that we’re now seeing a strategic reset. Having got to grips with recent market disruption, lenders are exploring opportunities for growth through new products, scaling and customer engagement – and we’re in discussions with several as to how we can support them with our end-to-end loan management software.
Future-proofed audit trails
We also see some lenders forging ahead to design and build their own digital platforms, which is understandable in terms of the perception that self-build brings fuller control, or continuing to rely on legacy technology. But with either scenario, there are big challenges around scalability, flexibility and compliance. For instance, creating future-proofed audit trails is more essential than ever in the era of Consumer Duty, and there are many complex nuances around delivering that, whether its through a legacy platform or an untested one.
In my view, the market really needs two thing at the moment:
Given the disruption and uncertainty across the sector, lenders need to have full confidence in the foundations of their loan management platform. It must be robust, fully tested and fully compliant.
At the same time, companies need to be fleet of foot in the new consumer environment. That means adapting rapidly to market change and customer requirements and quickly deploying new features to their platform, and releasing products to market as and when required. Scalability will also be key for many.
Rapid Deployment is Key
With our compliance and technology expertise, and our long heritage in the lending sector, we can provide that reliability – and with our technology-driven Fintech culture as Lenvi, we also bring speed, flexibility and agility to our clients. Our Software Development Kit (SKD) enables you to take our ‘out-of-the-box’ platform interface and develop your own variations. Feature-toggling on the platform allows you to rapidly deploy, test, measure and refine new functionality as you go, presenting lenders with the competitive edge to go to market with innovative solutions that both improve the consumer experience while meeting Consumer Duty regulations.
It’s also worth adding that my colleagues at Lenvi haven’t just built the technology, they’ve built the show home. If you want to see what you could achieve with your loan management platform, we can show you. We can demonstrate how you can adapt your approach to meet your obligations under Consumer Duty, provide agile and innovative customer service and develop new opportunities for growth. If that’s of interest, do get in touch for a chat.