What is it about?
Classifying the fintech industry is a multi-faceted field encompassing technology, finance and innovation fields.While it is not yet recognised as an independent industry at the macro level, it is a key component of the broader financialsector. Fintech firms play a vital role in the development and ownership of fintech systems, platforms, and apps.Technological tools have the potential to empower firms to provide loan services for individuals and businesses -convenient financing solutions for various needs. It also offers a faster and more cost-effective alternative to traditionallenders, with much lower interest rates. One surprising aspect of this development of industry is the number of non-intermediated transaction. Digital adoption is already a reality: around 73% of interactions with banks globally are nowconducted through digital channels [1]. In the banking sector, there are stringent regulatory requirements in place regardingcapital, liquidity, and risk management. This does not allow them to be as flexible with small business owners, but ratherconservative. In terms of financing SMEs and start-ups, this requires a change in the evolution of their current businessmodels. The solution is the fintech industry, in particular crowd lending
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Why is it important?
In recent years, companies around the world have had to contend with banks restricting credit because ofthe Covid-19 crisis. In this scenario, several sources of alternative financing have emerged, being driven bynew technologies and the Internet. Among them, crowdfunding and crowdlending have become increasinglyimportant alternatives to banks, venture capital, public grants or angel investing. The lack of access to financefor Small and Medium-sized Enterprises (SMEs) poses a major challenge even in countries where theavailability of bank finance has remained relatively stable throughout the global financial crisis. TheInternational Monetary Fund believes that institutions play a key role for the financial inclusion of SME [14].Financial institutions have recognised the need to adapt to the market. Major banks are now seeking agile andinnovative solutions to enhance customer experience, expedite loan decisions and provide optimal service whileminimising risk at the same time.
Perspectives
The growth of digital banking services, the emergence of digital lending platforms and the increasingcollaboration between banks and fintech companies are driving the expansion of fintech lending globally.Overall, alternative forms of lending appear to be a complementary addition to more traditional credit markets[12]. Besides the challenging and uncertain macroeconomic environment, investors are adapting to a new financial framework with higher interest rates and inflation, which is changing their perceptions of risk andreward. Fintech companies will continue to benefit from the significant changes occurring in the traditionalbanking system, the rapid adoption of digital technologies and the growth of e-commerce globally, particularlyin emerging markets. In the mainstream market, banks have embraced the potential of fintech to drive economicgrowth, while balancing the need to maintain stability and address cybercrime risks. In conclusion, the trade-offs involved in maintaining financial stability have a direct impact on future inflation and economic activity.Our analysis indicates that while P2P lending may potentially displace some bank lending, it is not likely toreplace it entirely. Consequently, the role of banks in credit and deposit markets and also in capital raising isunlikely to change significantly. One key question is whether the algorithm should be fed first with internal datagenerated by the bank and then supplemented with data from external sources, or whether it should be allowedto draw data from different sources simultaneously. Developments in artificial intelligence technology are alsoinfluencing the lending decisions and the need of banking analysts in traditional banks .
Assistant Prof. ,PhD Mariyana Veselinova Kovacheva
Technical University – Sofia
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This page is a summary of: Crowd lending in context of fintech industry, January 2025, American Institute of Physics,
DOI: 10.1063/5.0258738.
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