Consumer credits - how has it changed in the last couple of years?
Nov 17, 2021
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During the last couple of years, consumer lending was the most dynamically growing segment in the European market. As a result of which the total volume of debt on consumer loans has been increased by 3 times over this period. Against the background of a gradual decrease in interest rates in the banking market, consumer lending became more and more attractive for credit institutions due to its higher marginality, while customer demand for credit products was due to the gradual implementation of delayed consumption expanded in the years of 2014-2016.
Since the beginning of the pandemic, banks have revised the criteria for the risk profile of lenders. The requirements for the credit history and the indicator of the client's debt load were increased so that the potential client could comfortably service the debt without objection to their financial situation.
The topic of customer credit has become frequently important in the e-commerce area as new members and growing customer demand for these solutions extend to shape the sector. The suggested new rules, and especially modifications to the range of the current directive, will consequently influence the sector.
In 2020, despite the pandemic and restrictive measures, the consumer loans market set a new record: credit institutions issued an increase of 43% loans, which exceeds the indicators of 2019 by 26%.
The main reasons for the growth in credit lending were the decrease in rates on market programs of banks against the background of a general easing of monetary policy.
Also, a significant influence was used by the general crisis trends in the economy associated with the COVID-19 pandemic.
What do experts say?
According to the recent studies of Swedish specialists from smslansnabb.se 2020 was a test of the maturity of the digital marketplace. Due to the decline in market interest rates, experts have observed an increase in demand for refinancing programs for previously issued credit loans. It has been over a decade since the outbreak of the global financial crisis, and we can see that the consumers in the Eu have increased their debt levels. It can be due to many reasons, some of which are low-interest rates, new business practices from lenders, novel business models, etc. Nowadays, many lenders are trying to come up with innovative ideas to find new revenue sources, such as implementing new fees or other charges on loans.
According to current forecasts of experts from Smslansnabb, consumer lending growth will depend on the scale of restrictions depending on the upcoming Covid-19 waves around the world. Given the current financial situation, the drop in real incomes of the population and the rise in credit demands have led to an increase in the average size of the loans and the average loan terms. According to the research, most banks in Sweden showed a significant increase in loans in terms of consumer lending at the end of 2020.
To the question, if the experts see an increase in customer interest in digitizing debt transactions during the pandemic, the answer is - yes. In a pandemic situation and a high demand for a client, digitalization is one of the most important tools for the development of the lending business for the entire banking market. With regular studies, constant monitoring, and proper research, we are getting the most accurate forecast and statistics about the current situation in the consumer lending market.