Digital lenders’ revenues rose by 37pc in first year of pandemic
Digital lending firms globally saw a 37 per cent increase in revenues during the first year of the pandemic, new research has found.
A report from the Cambridge Centre for Alternative Finance, the World Bank Group and the World Economic Forum, found that fintechs worldwide were broadly resilient to the Covid-19 crisis.
Digital lending was the second-largest segment by transaction values in 2020, accounting for 20 per cent of the market, behind digital payments.
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Excluding the Chinese market, which saw a regulatory crackdown prior to the pandemic, global loan originations by digital lenders rose from $87bn in 2019 to $104bn in 2020.
“Despite the pandemic, most digital lending models grew in 2020 overall,” the report said. “Only a few of the smallest business models reported decreases.”
The peer-to-peer consumer lending sector remained the largest business model globally among digital lenders, the report found. However, the segment’s year-on-year growth was modest, largely due to the decline of the Chinese market, rising to $35.08bn from $34.02bn.
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Other business models grew at a faster pace in 2020, including P2P business lending which grew to $15.91bn from $7.62bn.
“Growth in business finance in light of the pandemic is not entirely surprising, considering that digital lending firms functioned as delivery or implementation partners in government schemes to support the small- and medium-sized enterprise sector,” the report said.
“Examples include the SBA’s Paycheck Protection Program in the US, the Coronavirus Business Interruption Loan Scheme in the UK, and the Coronavirus Small and Medium Enterprises Guarantee Scheme in Australia, all of which enabled several fintech digital lenders to originate loans via these programs.”
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The study included data from 1,448 fintech platforms operating in 192 areas worldwide. Digital lending firms made up 44 per cent of the respondents.
The report also found that the overall fintech ecosystem has grown despite the challenges of the pandemic. From 2019 to 2020, transaction values of retail-facing fintech platforms increased by 47 per cent, reporting $357.77bn in 2019 and $526.21bn in 2020.
“Overall, the findings indicate that the fintech industry has been resilient, and activities have continued to grow, although it is important to note that the ongoing global macroeconomic and geopolitical situation is adding stressors to the sector that should be monitored,” the report said. “Specific factors influenced growth, particularly the jurisdiction of operation, lockdown stringency level, and participation as distribution partners of government relief programs.”