Creditinfo Global Lending Industry Trends 2020

2020
GLOBAL LENDING
INDUSTRY TRENDS
2020 GLOBAL LENDING INDUSTRY TRENDS
Foreword
The tango of alternatives and classics in credit risk management and
fintech is a beautiful dance that we will enjoy for a few more years to
come, it seems.

The alternatives challenging the status quo are striving to narrow the
gap between the consumer expectations and the ability of current
business to meet them, so whoever will manage to close that gap
will be able to move the whole party to a completely new dance
floor. Interestingly, these challengers that defy, support or
supplement the classic players can be quantified and the number is
impressive: more than 35.000 start-ups in the past 5 years. Such
numbers don’t show a trend anymore, they show a reality.

We believe that sharing is the way to grow together, because most
of us share the same goal: a higher level of financial inclusion and
this is what counts.

Let’s share and grow faster together, in facilitating access to finance,
The Creditinfo team
Be&Do | Value Consulting

About the report
TRAC KI NG TRENDS IS A HUN T OF VALUE TH E PATTERNS OF LENDING FOR 2020
If we want to understand the future trajectories of the The lending industry has become increasingly
lending industry, we have to look at the expectation active, even to the point where it is becoming
gaps that are created by the established and difficult to track and remain aware of all the
emerging value models. changes and developments. By looking at
consumer-facing value propositions, new products
This entails investigating business offerings and value and features, acquisitions and new market entries,
propositions and not merely tracking technological we identified a set of industry patterns.
advancements like blockchain or AI. Technology
interest us only in case it leads to differentiated These patterns allow us to clearly understand the
position in the market and competitive value that can present situation as well as envision the possible
be provided to the end client. future scenarios.

TREND CLUSTERS
This report covers three
01 02 03
major developments in
the lending industry:
ADDED FULL HY PER-

VALUE PICTURE SEGMEN-
LENDIN G SCO RING TATION

TREND CLUSTER 01
ADD ED
VA LUE
LEND IN G
CH ALLENGE SOL UTI ON

ADDED VALUE LENDING
For a long time, lending products have been regarded as The models discussed here are not entirely new - some of
a single feature service that is driven by segmentation the players have been using them for as long as 3-4 years,
A convergence based on client risk-profile, promise of short interactions
and attractive offers regarding pricing or payment terms.
but it is the proliferation of such approach and the share
size of variations that signals the increasing importance of
trend - separate With promises of seamless and fast service becoming

the industry standard, offer-based marketing has been
providing additional value in the lending market.
eroding margins of lending market players. The solution to the problem of a commoditised product is
functionalities are Due to such prevailing approach it is increasingly difficult
simple - offer an added-value solution that either
addresses a bigger need or allows to use the product in a
combined into a for lending players to differentiate themselves. Some of

the players still manage to rework their back-end
more efficient way. The market has come up with a variety
of different approaches - integrating tracking and
systems to offer their customers pricing innovations like monitoring tools, adding free credit-scoring, providing
single offering. more precise or adaptive interest calculations, but this
takes a long time to develop and sometimes can be hard
educational and guidance content, allowing on-demand
interactions with specialists and experts, etc.
to market and communicate to the end-users.
Added-value lending is a convergence trend, which means
The market who focuses on attracting consumers and that we stop regarding lending as a product and start
first interactions misses out an important point - A) thinking of it as an ongoing service. Lending product
clients who opt-in for lending products have a high becomes a tool. Giving clients a tool instead of a product
chance of being repeat users B) prospects who are also increases the potential switching costs.
illegible to get a product at the moment, might become
high-value clients in the future.
IMPLICATIONS FOR BUSINESS IMPLICATIO NS FOR CONSUMERS
Businesses are always looking to optimise their client acquisition and retention Due to such added-value offerings in the market clients will have
efforts. Added-value lending is not the result of optimisation but rather a product increased expectations about the way the product usage can be
of diversification, i.e. developing new channels, offerings and messages to attract controlled, monitored and what outside help they can expect in
users that might initially be uninterested in the core lending products. different product usage situations. The question that lending
players have to answer is how their product is going to impact their
The additional tools companies are providing consumers with are turning into clients or even ensure their financial well-being in the future
brand-specific sales channels that can be developed to independently attract new
customer and client segments. Another use - building ongoing and repeated
service usage that helps building brand loyalty in a segment that is characterised
by extreme rates of service switching.

TREND CLUSTER 01
ADDED VALUE LEND ING
01
IN FORMATION WITH
PERSONAL IZED PRODUCTS
Companies are addressing an information

seeking consumer with a promise that the
product offerings are going to match their
personal situation.

INFORMATION WITH
PERSON ALIZED PROD UCTS
Presenting lending
products as part of a
bigger package.
SAVVY MONEY CREDIT SESAME CREDIT SUDHAAR
Products that fit Credit-scoring with Extensive reporting

user’s credit profile. personalised offers. with tailored offerings.

INFORMATION WITH
PERSON ALIZED PROD UCTS
Providing educational Adding career and salary

content that unlocks advice and content on top
additional benefits. of a traditional product.

TREND CLUSTER 01
02
PL ANNI NG A ND TRACKING
Additional level – providing planning,

tracking and monitoring tools that help
you stay informed about your financial
situation and obligations in real-time.

PL ANNI N G AND TRACKING
MOGO
progress trackers,
reminders, spending
trackers, credit-score
combined

THINKMONEY
Account with in-build

credit product and
monitoring tools.

The same development is

reflected through recent M&As.
Integrating their BillGuard becomes Affirm acquired Payoff and Commonbond

services with Prosper Daily of Sweep (app based integrated with Moven
Wealthsimple Prosper (P2P personal finance (personal spending
and Equifax. lending). tool) in 2016. management).

TREND CLUSTER 01
03
PL ANNI NG A ND REBUILDING
A cluster of services aimed at helping

people rebuild their credit-score.

PL ANNI N G AND REBUILDING
Lending products
with a promise of a
positive impact.
PAYOFF MONEY LION

SELF LENDER
Loans for covering credit Getting a loan,

Building credit
card debt and building increasing savings and
while saving.
back creditscore. monitoring credit.

PL ANNI N G AND REBUILDING
DAVE
Identifies upcoming
payments that will
put you in red.
Borrow from your

next pay-check at 0%.

TREND CLUSTER 01
04
ADJUST ING DEALS
A cluster of services that adapt to

changing situation or client needs.

Flexibility In general, the fintech sector has been showing exemplary performance in
terms of different ways in which it enables clients to control, change and
spillover in shape the products that they are using. In comparison to these
fintech developments, lending industry has still some catching up to do.
EXAMPLES OUTSIDE THE LENDING INDUSTRY:
ACTIVE HOURS STASH BACKMEUP MYFUTURENOW
Cash out based Investing with Flexible insurance Consolidating

on hours. no money. of things pension products.

ADJUSTI NG DEALS
EARNEST ASCEND
Using precision pricing Automatically adjust a

models, so consumer can loan as the borrower’s
change and customise risk profile changes.
monthly payments on the
fly and the company
changes the rest.

ADJUSTI NG DEALS
CLIMBCREDIT
Identifying universities
with good return on
investment.
Reducing fees, if the

student does not find
a job after graduating.

2020 GLOBAL LENDING INDUSTRY TRENDS ADDED VALU E LE N D IN G | S U MMA RY
OLD MODEL DEV ELO PMENT T RAJECTORY

This approach marks the tonal shift from favouring the speed and
seamlessness of the on-boarding process to the ongoing use of the service. It
means that instead of just catering for the very first interactions with clients,
lending players are starting to provide value across the whole client journey –
understanding the client's situation, tailoring and personalising the offer,
sell a loan providing tools to keep track of the situation and providing help on the way to
keep the client out of financial trouble.
Lending products are slowly rebranding themselves and products for long-
term financial-health where lending offering is just a part of a bigger package.
In some cases, it helps solve the credibility issues that the market has been
suffering from, in others – it opens new ways to attract and retain customers.
NEW MODEL
un derstand my ta ilor my help keep keep me out

sit uat ion of fers track of trouble

TREND CLUSTER 02
FULL
PI CTURE
SCOR ING


FULL PI CTURE SCORING
Traditional credit score has been devised to The question that the industry started asking is simple
serve a client that has an existing history of – what others types of data can we use to assess the
Companies are financial product usage – and this by definition
excludes a number of potential clients who
credit-worthiness of an individual?
discovering new ways either don’t have a long financial history, have
not used lending products before and/or have
If previously it has been about getting access to
comprehensive financial data, now the potential field
unstable diversified income. of solutions is becoming wider.
to serve existing and Every market features a number of segments The question of how can we extract financial data that
previously unidentified that have an existing need for lending products

and are capable of keeping their financial
would prove the prospect’s credit-worthiness is
replaced by the question of how can we extract any
obligations, but cannot provide accepted forms data that would prove the prospect’s creditworthiness?
consumer segments. of proof of their willingness. Even though it is seems like a small difference in
wording, the implications for the industry are huge.
The possibility to use diversified data sets to assess potential clients will The possibility to seamlessly integrate scoring into a wider range of products means
create new ways to acquire and convert clients as well as a possibility that at some point consumers will expect personalised offerings and flexible
for businesses to directly (through lending products) or indirectly conditions from services that used to rely on fixed pricing – telecommunications
(through data partnerships) tap into financial markets. being the closest and most realistic candidate.
For traditional lending players this means the necessity to form data Inevitably, credit scoring is becoming a broader concept than just a tool for lending
partnerships and collaborate with existing popular B2C offerings that services. The way it spills into social, digital, mobile and personal dimensions
allow to reach wider audiences as well as identify and evaluate them. increases its relevance and promises increased returns for the user.
At the same time, if the pace of scoring proliferation continues, the increased
anxiety related to the pervasive evaluation will only increase. This can only be
counter-balanced by creating a sense of equal trade - consumers will come to
expect to be rewarded for the personal data they provide.

TREND CLUSTER 02
FULL PICT URE SCORING 01
ADDIT IONA L DATA
Account balance, spending habits

or even education and job position
become the standardised way to
personalise offerings to clients.

ADDITI ONAL DATA
KABBAGE CREDITKUDOS FLOAT EARNEST
Accessing additional Assessing Assessing money Incorporating education history

business data. spending habits. management habits. and employment background
TREND CLUSTER 02
FULL PICT URE SCORING
02
ON LINE : SOCIAL MED IA
Social media information becomes

both an addition and a substitute
for traditional scoring data.

ONLINE: SOCIAL MEDIA
FRIENDLY SCORE NEENER FRIENDLY SCORE
Social credit score B2B offerings on Platform evaluating

through connecting social media based and lending based on
all social media scoring. social media score.
platforms.

TREND CLUSTER 02
FULL PICT URE SCORING 03
ON LINE : E-COMMERCE B EH AVIOR
Transactions that we perform online provide

a opportunity to create a user’s picture:
travel agencies, shopping and group-buying,
online gaming and payment providers are
entering the field.

ONLINE: E-COMMERCE BEHAVIOUR
With historically insufficient credit information, China is now

moving to the forefront in alternative scoring methods.
BONUS FEATURE
BAIHA
China’s largest online Is gradually testing and A popular Chinese dating

consumer lending expanding its “social credit” app provides incentives
marketplace partnering system that will give users such as more highly visible
with transactional online a numeric rating based on profiles to members who
companies to use their their spending habits and have Sesame Credit scores
data. social connections. and wish to make these
viewable by others.

TREND CLUSTER 02
04
MOBILE-BASED SCORING
The biggest untapped source of data is

the one device that we spend the most
of our time with – our own smartphone.

MOBI LE-BASED SCORING
CIGNIFI TALA JUVO
Scoring based on Assessing Mobile identity

mobile behaviour. creditworthiness solution.
by analysing
user’s mobile
data.

TREND CLUSTER 02
05
PSYCHO METRIC
If our personalities determine

our behaviour then one of ways
to predict it is to directly address
psychometric measuring.

PSYCHOMETRIC
COREMETRIX
Mapping psychological
model to build behaviour
models across the
user’s lifecycle.

TREND CLUSTER 02
06
INTE GRATI ON
Lastly, it becomes more apparent

that there is an increasing need to
integrate all of the aforementioned
data sources into one profile.

INTEGR ATI ON
CREDIT VIDYA
Combining 10,000
data points.

2020 GLOBAL LENDING INDUSTRY TRENDS F UL L PICT U RE S COR ING | S U MMA RY
The rules are changing – DEVELOPMENT TRAJ EC TORY WHAT DOES IT MEAN FOR
CONS UMER EXPEC TATI ONS?
it’s not about who has the The first transformation of the scoring use is
noticeable in the way additional scoring methods
Expecting the lending service to be
are gaining the spotlight and replacing the 01
money to lend, but rather traditional model in situations where there is no
traditional financial data.
provided by anyone and through any
channel.
about who has the data But the full picture scoring trend does not stop 02 Expecting increasing returns from
brands that we are spending most of
here. Naturally, if we are able to access untapped
to assess. data, we can also start thinking of creating new

types of data that would, over time, result in new
our time and financial resources on.
ways of assessing a person’s credit-worthiness.
Whoever is producing data on users, is

inevitably a direct player or an indirect
participant in the lending market.

TREND CLUSTER 03
HY PER SEG MEN TA TION


HYPERSEGM EN TATION
Saturation of lending players results in overabundance Instead of building lending services that are for
of tactical actions and campaigning used to attract the
Companies are
everyone, more and more lending players are
fleeting consumer base. At the same time, due to some choosing a more focused approach. Hyper-
increasingly rigid regulation in some markets, lending segmentation does not mean merely targeting
discovering new ways companies are struggling to find ways to stand out and
claim their uniqueness.
specific segments through marketing communications
– it entails building an entire offering based on the
use-case and context of a particular user group.
to serve existing and The most basic yet powerful decision heuristic that
both B2C and B2B clients are using is a simple question Hyper-segmented offerings are winning over generic
previously unidentified – is it for people like me? What we want to know is

whether the offering we are choosing is built around
lending products in several ways: it is easier for such
products to A) get access to relevant channels, B)
our needs and whether people like us are actually using construct messaging that directly addresses
consumer segments. it and finding it valuable. And some companies are
starting to strategically approach a question like this.
consumer problems and concerns and C) provide
service conditions and terms that make more sense
to the interested party.
For a business, having a segmented offering or product is the easiest With an ever-increasing choice of lending service providers, consumers
way of saying that we understand our clients. At the same time, become more active in questioning whether the service has been built with
building a product around a specific type of use requires to tailor the them in mind. Hyper-segmented offerings are creating an expectation to
product, conditions and tools as well as content and messaging. see lending products integrated directly into channels or at least closely
tied-in with the consumers' end-goals.
With a number of success cases of segmented offerings, most of the
lending players will be encouraged to at least rethink their product It is also possible that consumer awareness of specialised providers will
portfolio. result in game-changing habits – clients will start looking for and selecting
partners through the relevance created by specialisation and not just
highest awareness in the market.

TREND CLUSTER 03
HYP ERSE GMENTATION
01
CLIEN T TYPE S: CO NSUME RS | BU SINES S
Services that are tailored to match the needs of a narrowly

defined customer who is looking to achieve a specific set of goals.

CLIENT-TYPES:
01 CON SU ME R S
Companies targeting
specific need groups
with different conditions,
requirements and even
product portfolios.
Alternative scoring Focused on repaying Financing for

for farmers student loans underprivileged women

CLIENT-TYPES:
02 BUSI N ESS
An equivalent change is
happening on the side of
business lending – lending
offerings are tailored to
specific industries and
business settings.
Financing for Franchise Financing for

power sports financing retail business

CLIENT-TYPES:
02 BUSI N ESS
FASTPAY
Lending for digital

industries: digital ad
business.
“Media vendors struggle with slow

payment terms from advertisers and
agencies, which often extend past
120 days. This creates working
capital challenges for these vendors,
which in turn forces them to delay
payments to their own suppliers."

TREND CLUSTER 03
HYP ERSE GMENTATION
02
SITUAT IO NA L: O NLINE | MEDICAL | PAWNS HOP S
Situational segmentation works when a lending business

is targeting clients based on use-cases and needs.

CLIENT-TYPES:
01 ONL IN E
E-commerce purchase
financing has become
an entirely self-sufficient
lending category.
Paying over-time for Lending for Student purchases

online purchases shopping online and repayment

CLIENT-TYPES:
01 ONL IN E
KLARNA
Extensive e-commerce
partner list, including
mainstream and high
end retail: Nike, Marc
Jacobs, Michael Kors
and Theory.

CLIENT-TYPES:
02 MEDICAL
Patient Medical
Companies are creating financing bills
specific offerings for
health-related needs.

CLIENT-TYPES:
03 PAWNSHOPS
Enables the use of Providing loans
luxury assets to based on items
Companies are secure funding offered for sale
allowing to exchange
goods for credit.

TREND CLUSTER 03
HYP ERSE GMENTATION
03
IDEAL OGI CAL : E THICAL
An entire new segment based on funding

initiatives of ethical purpose is emerging.

ETHICAL LENDING
Etchical P2P
investments
Services that seek to
provide added value
outside financial terms.
Loans for Social development

non-profits loans

ETHICAL LENDING
CHARITY BANK
Charity focused
lending and
investing.

TREND CLUSTER 03
HYP ERSE GMENTATION
04
INFORMATIO N H UBS
With the increasing number of financing options in each market, there

is an increased need for services enabling end-users to overview and
select best suiting options or be directly guided to the best fitting one.

INFORMATION H UBS
01 02 03 04
Category-based Compare business Content and product Student loan
comparisons loans selection hub comparisons

2020 GLOBAL LENDING INDUSTRY TRENDS HY PERSEG ME N TAT IO N | S U MMA RY
Every situation, channel or DEVEL OPMENT T RAJ EC TORY
Traditionally segmentation in lending market has worked as a

client goal is a new opportunity way of picking a consumer segment with a specific risk profile.
Hyper-segmentation marks a move to more specific service
for the lending industry to targeting that accounts for different product use-cases,
contexts and situations, particular groups of people that can
create fresh value. be defined through a shared profession, goals or stage of life.
It is through hyper-segmentation that we are discovering

entirely new untapped fields and sources of business. The
developing segmentation practices mean that lending players
are strategically approaching channels, partners and are
TRADI TION AL EMERGING becoming less reluctant to build products around a single
PR OP OSIT IO N PRO POS IT ION entity or instance of use.
With the increased chances of biggest specialized digital

Offering a general Building business platforms (from e-commerce to hospitality) offering their own
product to the widest around client lending products, hyper-segmentation seems more of a
necessity than a mere niche strategy.
demographic situations and goals

THE REALISATION
There are different types of need-states that

the industry is serving, and that those needs
go beyond the mere transaction:

INFORMAT IONAL CUR RENT

CLIENT USER
UND ER SERVE D TRANSACTIONA L RETURNING

CLI ENT CLIENT CL IENT
Client having Client trying to Client focused Client assessing Client focused on
restricted access understand what on the efficiency the flexibly of increased long-
to most financial is best in their of transactions the product or term returns and
tools and services particular situation service in use cooperation

INFORMAT IONAL CUR RENT

CLIENT USER
UND ER SERVE D TRANSACTIONA L RETURNING

CLI ENT CLIENT CL IENT
As well as service DEMOGRAPH IC addressing a specific age or income group
targeting that goes

beyond mere CHANNEL building a lending offering by relying on a specific channel
demographic.
CONTEXT targeting specific situations that clients find themselves in
PRO DUCT building a product around a specific type of purchase
GOAL S addressing clients with pre-determined goals or aspirations

GOI NG FORWARD THE C HECKLIST FOR 2020
If we want to meet 2020 Do we favour immediacy of transaction

or cater for long-term relationships?
with certainty, we need to
ask ourselves these questions: Does the service provide more meaning
and value beyond the transaction?
2020 GLOBAL LENDING Do we understand our client better

than others? Can they feel it?
INDUSTRY TRENDS
Do we create opportunities for new
client segments to approach us?
RESEA RC H PA RTNERS
VALUE
CO N S U LT I N G
We are a management consultancy focused on

recovering lost business value through innovation,
product and brand strategy.
INQUIRE ABOUT OUR AVAILABILITY
[email protected]

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2020

The Creditinfo team

Be&Do | Value Consulting

About the report

TRAC KI NG TRENDS IS A HUN T OF VALUE TH E PATTERNS OF LENDING FOR 2020

Be&Do | Value Consulting

This report covers three

ADDED FULL HY PER-

Be&Do | Value Consulting

CH ALLENGE SOL UTI ON

trend - separate With promises of seamless and fast service becoming

combined into a for lending players to differentiate themselves. Some of

IMPLICATIONS FOR BUSINESS IMPLICATIO NS FOR CONSUMERS

Be&Do | Value Consulting

Companies are addressing an information

Be&Do | Value Consulting

SAVVY MONEY CREDIT SESAME CREDIT SUDHAAR

Products that ﬁt Credit-scoring with Extensive reporting

Be&Do | Value Consulting

Providing educational Adding career and salary

Be&Do | Value Consulting

Additional level – providing planning,

Be&Do | Value Consulting

PL ANNI N G AND TRACKING

Be&Do | Value Consulting

PL ANNI N G AND TRACKING

Account with in-build

Be&Do | Value Consulting

PL ANNI N G AND TRACKING

The same development is

Integrating their BillGuard becomes Aﬃrm acquired Payoﬀ and Commonbond

Be&Do | Value Consulting

A cluster of services aimed at helping

Be&Do | Value Consulting

PL ANNI N G AND REBUILDING

PAYOFF MONEY LION

Loans for covering credit Getting a loan,

Be&Do | Value Consulting

PL ANNI N G AND REBUILDING

Borrow from your

Be&Do | Value Consulting

ADJUST ING DEALS

A cluster of services that adapt to

Be&Do | Value Consulting

EXAMPLES OUTSIDE THE LENDING INDUSTRY:

ACTIVE HOURS STASH BACKMEUP MYFUTURENOW

Cash out based Investing with Flexible insurance Consolidating

Be&Do | Value Consulting

Using precision pricing Automatically adjust a

Be&Do | Value Consulting

Reducing fees, if the

Be&Do | Value Consulting

OLD MODEL DEV ELO PMENT T RAJECTORY

un derstand my ta ilor my help keep keep me out

Be&Do | Value Consulting

Be&Do | Value Consulting

CH ALLENGE SOL UTI ON

previously unidentiﬁed that have an existing need for lending products

IMPLICATIONS FOR BUSINESS IMPLICATIO NS FOR CONSUMERS