TOP LENDING TECHNOLOGY TRENDS FOR 2023 & BEYOND

The consumer lending sector has largely recovered from the pandemic, though COVID made a significant mark on the technology lenders use. The lending industry had lagged in its use of technology prior to the pandemic, but lenders have now caught up to other industries in the technology they use. While the pandemic brought an increased use of lending technology, trends have moved beyond business survival. In today’s post-pandemic world, financial technology is now enabling lenders to become more efficient in a tighter lending market.

Digital lending technology enabled lenders to provide potential borrowers with faster and more accurate decisions, along with better, more personalized customer service. From online applications to artificial intelligence (AI)-enabled chatbots, lending technology trends are increasingly pairing automation with data to bring consumers better experiences. When it comes to lending technologies, keeping up with these trends helps lenders pick and choose the best solutions to optimize their business operations.

We have outlined the top lending technology trends in the chart below, then we will dive deep into each trend and discuss how it is affecting the lending industry.

Technology	Description
Artificial Intelligence (AI)	Optimizes customer service, providing 24/7 account access via mobile devices. Assists with risk management, fraud detection, and prevention. Supports lending decisions and big data analysis. Facilitates robotic processes and voice interfaces.
Big Data	Enables lenders to gather and analyze large amounts of data for customer segmentation and cross-selling.  Integral to risk assessment, compliance maintenance, and fraud management.
Blockchain	Offers potential for improved security in loan transactions.  Still in the early stages of adoption in the lending industry.
Cloud Computing	Facilitates secure online payments and round-the-clock customer service.  Allows lenders to scale services quickly and pay only for needed services.
Robotic Process Automation (RPA)	Automates processes to save on labor and minimize errors.  Enables chatbots to handle frequently asked questions and labor-intensive tasks.  Frees up human agents for more important concerns.
Voice Interfaces	Uses AI-powered chatbots to reduce costs and address customer queries.  Coexists with traditional communication channels like email, telephone, and texting.

Previous, Current, & Future Lending Technology Trends

Lending technology trends are largely continuing along the same lines as they were before the industry disruptions of 2020. However, while lenders looked to incorporate technology during the pandemic to remain in business, lenders are now recognizing how this technology can make them more flexible and efficient.

Prior to the COVID pandemic, Forbes looked at several lending technology trends, which included:

• Artificial intelligence (AI): Used to optimize customer service, it’s helped facilitate 24/7 account access via mobile devices. Many lenders are also using this technology to help with risk management, especially fraud detection and prevention and lending decisions, while it’s becoming an imperative technology for working with big data, robotic processes, and voice interfaces.

• Big data: The huge amount of data gathered regarding potential borrowers allows lenders to garner insights easily, enabling the segmentation of customers for cross-selling products and analyzing customer feedback. Analytics paired with big data has become integral to risk assessment, compliance maintenance, and fraud management as well.

• Blockchain: This is one of the lending technology trends from a few years back that hasn’t yet been used to its fullest potential, yet blockchain looks to be a viable way in which to track and improve the security of loan transactions.

• Cloud computing: Utilizing the cloud allowed many lenders to survive and even thrive during the pandemic by enabling secure online payments, as well as making round-the-clock customer service possible. It further allows lenders to pay only for those services they need, scaling their services quickly and easily.

• Robot process automation: Through the use of automation, lenders saved on labor, minimized errors, and lowered operational expenses. The software used to automate a lender’s processes has enabled chatbots to answer frequently asked questions, freeing human customer service agents for higher priority concerns and other labor-intensive tasks.

• Voice interfaces: Using AI software, chatbots were seen as a way to lower costs while responding to customer queries and resolving issues. Interactions from more traditional forms of communication like emails, telephone, and texting won’t likely be entirely replaced, though many lenders already use chatbots.

A few of these trends have not yet come fully to fruition within the consumer finance industry. However, AI, big data, and cloud computing will undoubtedly become an increasingly important part of lending technology. Now, let’s look at some lending technology trends that are looking to make waves midway through 2023.

2023 Lending Technology Trends

Cutting costs will be a central issue for lenders this year. High interest rates and inflationary pressures that cut into consumer spending point to where lending technology is going. Trends this year focus on frugality and efficiency, along with optimizing a lender’s operations to improve customer service.

ID Verification Systems

Digitalizing ID verification helps lenders verify loan applicants’ identities as a part of “know your customer” and anti-money laundering processes. Such digital ID verification assists in preventing fraud, and some even include tools that compare applicants’ facial features to that of their IDs. The market for digital ID verification solutions is estimated to grow at a compound annual growth rate (CAGR) of over 14 percent in the next four years, reaching $18.6 billion in 2027. Not only does this smooth the process of verifying a borrower’s identity, thus lowering the prevalence of fraud, but it also builds trust in a lender’s brand.

Embedded Lending

Powered by financial technology, embedded lending solutions are gaining momentum in the consumer lending sector. In simple terms, embedded lending involves loans offered through the business selling a product or service. It allows consumers to digitally apply for a loan directly, truncating delays, simplifying payments, and enhancing security. While embedded finance has been around for a while, these solutions took off during the pandemic as it embraces a remote-first approach to doing business. From $5.5 billion in 2022, the embedded lending market looks set to grow at a CAGR of over 19 percent to $32.5 billion by 2032.

Alternative Financing

Also referred to as peer-to-peer lending, P2P lending, or marketplace lending, alternative financing deals have increased 79 percent since the second half of 2020 and 30 percent since the first half of 2021, according to a Deloitte report released in spring 2022. Using lending technology, trends to incorporate alternatives began in the wake of the 2008 financial crisis. Alternative financing combines marketplace lending models that help underwriters determine loan amounts and terms with loan applications, underwriting, and servicing that’s done all online. Set to grow at over 23 percent CAGR from 2022 to 2030, consumers can utilize alternative lending platforms to bring borrowers and investors together to take out loans to consolidate debt or pay down high-interest credit card balances.

Blockchain Solutions

In a way, it’s rather curious that something associated with volatile cryptocurrencies would become a key lending technology. Trends surrounding the utilization of this encryption technology, however, go far beyond crypto. Using decentralized ledgers to track loan payments will help grow the alternative financing sector, making consumer data more secure. Blockchain solutions are only now being introduced to lending markets, though it’s certain the implementation of this lending technology will trend ever upward.

End-to-End Automation

Augmented by other technologies like AI, end-to-end automation looks set to take over many repetitive tasks traditionally done manually by lenders. This can be done through all stages of a loan, making the whole process seamless and more efficient for both lenders and borrowers. For lenders, a key benefit comes from a more personalized experience delivered to their customers, helping lenders anticipate what their customers want in terms of credit terms, interest rates, preapprovals, and other similar issues.

Automating the end-to-end loan process works by:

• Prefilling loan applications with information already provided by the customer.
• Using internet connectivity, applications can be automatically and accurately validated with data provided from other sources.
• Flagging data that’s inaccurate or missing so as to reduce the chance of any holdups.
• Personalizing and transforming the customer experience from application through to the final loan payment.

In a study conducted by Forrester Consulting, over 71 percent of the decision makers questioned planned to invest in the personalization of lending technology. Trends involving borrowers’ outlooks help lenders increase profits while improving their customers’ experience.    

defi SOLUTIONS: Keeping an Eye on Future Lending Technology Trends

It’s a year when lenders should proceed with caution when it comes to lending technology. Trends in 2023 focus on more bread-and-butter issues rather than experimentation with novel technology that hasn’t been adequately tested. In a sense, lenders are also returning to a more conservative outlook regarding technical issues. This is a year for lenders to be strategic in their thinking rather than risk investment in an untested technological revolution. It is a good time to invest in a more unified lending platform designed for greater flexibility.

With defi SOLUTIONS, lenders can provide customers with:

• Intuitive experiences via a mobile-friendly platform.
• Omni-channel access to customer service from a single hub.
• Speedier decisioning with capabilities to better nuance deals.
• Self-serve account management with 24/7 functionality.

Lending technology trends will naturally seek to make products and services more accessible to borrowers this year and into the future. Whether it’s easier-to-use software applications or multiplicity in communication channels, this year’s lending technology trends will seek to meet a lender’s customers’ needs more than ever before. Yet defi doesn’t just enable better service for customers, it allows lenders to easily scale their operations up or down depending on economic conditions and a lender’s needs while also optimizing efficiency within an organization.