FinTech Credit basically covers all activities facilitated by electronic platforms whereby borrowers are matched directly with lenders. It is also known as loan-based crowdfunding, peer-to-peer lending or market place lending.
And below are some factors which are driving the supply of new FinTech Credit provider and credit products.
1. New Digital Innovations like automated lending process, new non-traditional data sources to access credit risks (like social media, e-commerce website sales, reviews etc.)
2. Ease in Scaling. Everything is done online and therefore once the platform is built, the cost associated with acquiring new customers is really low.
3. Cost Advantages as there is no requirement of brick and mortar branches, no legacy IT systems required, no need to hold a lot of liquidity as such platforms are not governed as traditional banks, less compliance requirement compared to traditional banks etc.
4. New Lending Market Entrants because of withdrawal by traditional lenders from certain markets after financial crises. And also small business face difficulty in getting a loan from traditional banks.
Can you think of any other reason? Let us know in the comments.