Customer trust in lenders has plummeted in recent years.
The 2008 financial crisis, plus recent examples of bad examples of data mishandling and breaches that compromised millions of bank accounts, has led to many customers asking whether their bank has their best interests at heart.
As many as 1 in 5 customers no longer trust financial institutions to provide them with a loan – one of a bank’s primary functions.
However, despite this mistrust, borrower appetite for credit remains strong.
With the credit crunch and this mistrust of high-street banks, consumers turned to the flexibility offered by alternative lenders.
The rise in alternative lending
Whilst consumers are willing to borrow from alternative lenders; they will no longer trust a lender that does not operate ethically and transparently – as seen by the collapses of both Wonga and QuickQuid. Combined with recent FCA regulations, borrowers are much more careful when considering their credit needs.
Following the lead of disruptive, digitally-focused providers like TransferWise, Monese and Revolut, brands have analysed the day-to-day banking issues customers face.
These concerns include a lack of ethical behaviour, poor user-experience and transparency – and designed their services from the customer first to alleviate these issues.
Banking without the requirement for a bank will become a more daily experience, and surely, so will consumer lending.
Flexible point-of-sale lending is revolutionising the nature of financial transactions across a range of industry sectors, like how to pay for a holiday, buy a house, and even pay for medical treatments at a rate that matches customer budgets.
The potential of this lending method is enormous, with more than three quarters (78%) of consumers saying they would prefer using point-of-sale credit in the future.
What does this mean for traditional credit lending?
Banks and alternative lenders do not inspire high levels of customer loyalty, and must, therefore, work far harder to retain customers.
As more accessible point-of-sale lending businesses and customer-centric fintech brands continue to thrive, crucial several banking functions – like consumer credit lending will be displaced by newer, more agile providers.
If this growth of smaller, more customer-focused financial institutions continues, alternative lenders and banks are highly likely to see reduced customer numbers.
If lenders do not place a greater focus on what customers want – flexibility and transparency – their status as the go-to of the lending market may soon be a relic of the past.
About the author
David Bailey-Lauring is a single father of three boys and a content writer and regularly writes about personal finance, business, education and tech in the UK, USA, and Europe.