The future of lending in the global marketplace

The ability to access affordable credit is a critical element of private sector-led growth, particularly for small businesses that often lack the initial capital needed to grow and expand. Visible credit information registries are vital because, with credit information sharing, lenders are more aware of borrower’s capacity and ability to repay their loans, which can significantly decrease default rates, lowering the perceived risk of lending and cost of capital.
A report from the Federal Reserve Bank of New York shows consumers have had less access to credit in 2018. While the rejection of credit applications is up, the number of consumers applying for credit is down. The most troubling aspect of the report is that more consumers were rejected when they applied for credit cards this year. The researchers say rejection rates are also up on applications to refinance mortgages.
Two billion people worldwide do not have a bank account or access to a financial institution via a mobile phone, or any other device. According to the World Bank’s data, more than 20 per cent of unbanked adults receive wages or government transfers in cash, and many people in developing countries pay bills and school fees in cash.
Around 1.7 billion people are unbanked according to the World Bank, down from 2.5 billion only seven years ago. Considerable progress has been made in just a few years with innovations in fintech taking much of the credit for providing financial services access to almost a billion people.
However, 50 per cent of adults globally still remain excluded from the traditional banking system.
The unbanked population consists of adults who have no easy access to banks in their regions or who have developed a deep mistrust of the financial system. An initiative by the World Bank Group called Universal Financial Access 2020 is taking measures to ensure that the unbanked community has access to traditional platforms like checking accounts by 2020.
Financial inclusion has emerged as a significant policy objective over the past decade. There is a considerable will among policymakers, the development community and the private sector to bring the world’s two billion unbanked people into the formal financial system.
Financial inclusion is the pursuit of making financial services accessible at affordable costs to all individuals and businesses, irrespective of net worth and size, respectively. Financial inclusion strives to address and proffer solutions to the constraints that exclude people from participating in the financial sector.
Three key trends are reshaping financial services. FinTech companies are giving traditional banks a run for their money literally with new business models and innovative products. And disruptive technologies, such as artificial intelligence and blockchain, are enabling faster transactions while eliminating intermediaries.
When fintech emerged in the 21st Century, the term was initially applied to the technology employed at the back-end systems of established financial institutions. Since then, however, there has been a shift to more consumer-oriented services and therefore a more consumer-oriented definition.
Fintech has expanded to include any technological innovation in and automation of the financial sector, including advances in financial literacy, advice, and education, lending and borrowing, retail banking, fundraising, money transfers/payments, and more.
Today, fintech innovations are reshaping the global financial landscape. Many of these solutions open financial access specifically for underserved and unbanked populations, helping to drive the issue further into public consciousness. It’s a particularly ripe opportunity in Southeast Asia — while smartphone penetration in the region is high, the number of people with bank accounts is low: according to KPMG, in 2016 only 27 per cent of Southeast Asia’s 600 million people held a bank account.
In Singapore, financial services provider Pocket Money is attempting to close this gap by offering alternative lending options. The company aim to bring innovation to the lending industry by creating a global marketplace for lenders and borrowers via an easy-to-access, cross-border platform.
Pocket Money www.pocketmoney.credit/ helps borrowers to connect with leading companies around the world, breaking the barriers that prevented them from borrowing money from a competitive global marketplace. Lenders will gain access to a larger pool of potential borrowers by revenue-sharing with the lending business located all over the world. Focusing on micro-financing, Pocket Money makes loans available from P2P, B2C and B2B globally.
In 2016, more than $245 billion of funding was channeled through online alternative finance platforms across the Asia Pacific (APAC), according to a report by the University of Cambridge, the Australian Centre for Financial Studies and the Tsinghua University.
According to a Research and Markets report, the global P2P lending market was worth $26 billion in 2015 and is projected to reach $460 billion by 2022, growing at a CAGR of 51.5 per cent from 2016 to 2022.