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Loan monitoring is one area ripe for innovation. Personal contact with a banker can go a long way toward preventing defaults for small businesses.
Fremont, CA: The decade of the 2010s was a turbulent one — politically, culturally, and technologically. And the rate of change does not appear to be slowing anytime soon. The lending industry will be no exception. The rise of alternative lenders, the disruption of the consumer mortgage, and a growing awareness of the drag student loans have on the economy characterized the decade of the 2010s. Here are five trends that I believe will shape lending in 2021:
Robots to Start Monitoring Loans
For years, people have speculated about self-driving cars. However, the more mundane reality is that we already have AI-assisted cars that warn drivers if they are veering out of their lane, assist with parking, and provide a second pair of "eyes" when backing up, among other things. Lenders will benefit incrementally from technological tools that will help them do their jobs better.
Loan monitoring is one area ripe for innovation. Personal contact with a banker can go a long way toward preventing defaults for small businesses. An AI tool could monitor macroeconomic trends as well as individual borrowers' finances, alerting a lender when a loan may be in jeopardy. That critical forewarning allows lenders to reach out and work out a proactive plan with the company. On the other hand, AI tools could nudge small businesses to repay loans when they've had a good month, increasing the chances of full repayment and generating customer loyalty.
Nonbanks Will Keep on Expanding into All Forms of Lending
Amazon has already made loans to small businesses, and Apple has launched its own credit card. Square makes loans to small businesses, and repayment is automated through the use of its point-of-sale system on a daily basis. All of these financial products are offshoots of the companies' core businesses, and are intended to assist the companies' customers in achieving their objectives. I believe we will see a lot more of this type of innovation in the coming decade.
Employers, for instance, have long funded MBA programs for high-performing employees. Why not assist rising stars with student loan repayment as well? Our world is inundated with data. Large corporations with access to cutting-edge technology can delve into incredibly detailed information about their employees and customers. In 2021, people will witness an increasing number of businesses use that data to provide their customers with convenient and innovative lending options.