DIGITAL lenders have been urged to invest further in technology in order to cut their costs and compete successfully with traditional banks.
A white paper released by AI-led identity verification solutions provider Mitek, authored by fintech research firm Autonomous NEXT, found that European digital lenders are growing quickly, but their market share is still low relative to the $150bn (£117bn) opportunity.
The report found that while onboarding times have been drastically reduced by digital lenders, their acquisition costs remain high at $300 per customer, which is holding back their growth.
A know-your-customer (KYC) and anti-money laundering (AML) check could cost as much as $150 per customer, the report said.
“Additionally, the cost of their capital is preventing digital lenders from competing with incumbent banks on price – but this cost isn’t likely to be reduced anytime soon,” the report added.
Digital lenders were urged to invest in identity verification software to enhance the efficiency of the onboarding process in terms of speed and cost reduction.
“For digital lenders, mandatory KYC and AML checks are still largely manual, building delays and inefficiencies into the onboarding and vetting process,” said Rene Hendrikse, EMEA managing director at Mitek.
“Fintechs and digital lenders in particular need to ward off inefficiency and drive the best possible customer experience.
“Identity verification technology could give digital lenders the competitive edge they need, and may help them take market share away from traditional lenders.”