The coronavirus shook the world in 2020, its ripples undulating over into the new year and beyond. Today’s pandemic state is temporary, but one that has permanently altered the way we live, work and do business. That includes the way that we save, spend, and source money.
A recent survey of US consumers found that attitudes towards fintech businesses are shifting– especially for investing and lending. As a matter of fact, fintech lending usage has increased by a whopping 25% since the pandemic began last March. This increase, while more significant for generation z and millennials, is not strictly subject to age. Even baby boomers have jumped on the bandwagon, with 26% using some amount of fintech.
So why the change?
The pandemic has made us find reason to create distance between people and things that wasn’t thought about before. Lending has oftentimes been handled in-person at a financial institution, or through a third party who might assist in completing the transaction. With consumers staying home and away from brick and mortar environments, that leaves a gap that fintech lending can fill.
From a merchant’s standpoint (especially those that have a physical location), the pandemic has created a dire need to tighten belts and cut budgets. That means reducing paper costs, and the employee hours spent completing lending transactions, not to mention finding potential ways around lender fees associated with their partnerships. Most fintech lenders do not have the same cost structure and do not impose the same fees. In other words, for greater convenience and less expense, merchants can achieve the same effect with fintech. It’s a transition they wouldn’t have seeked with so much urgency had they not been pushed by pandemic circumstances.
A new lending paradigm
This sudden, necessary shift in how lending is being done begs a question: Is fintech lending going to overtake traditional lending? Unsurprisingly, the number one thing that convinces consumers to choose a lender is trust, and studies by McKinsey & Company show that consumers trust fintech lenders with equal weight as traditional banks. In addition, individuals who have converted have found that ease of use and other benefits may cause them to forgo traditional financing options for the long run, even after a return to “normal”.