Using modern technologies, loan companies have developed a niche neglected by banks, offering quick financing – available almost in real time and without leaving home.
Although banks still have a large share of the credit market, there are segments in which loan companies already dominate. This is the case with financing for small amounts. According to BIK data, non-bank institutions grant approx. 2/3 loans worth up to PLN 4,000. zł. A year and a half ago, this share was 25%. In the case of contracts up to 1 thous. PLN advantage of the loan sector is even overwhelming and exceeds 80 percent.
Loan companies reach for advanced algorithms
Why is this happening? Because of low interest rates and non-interest cost limits, banks stopped paying out low-value loans. Lending entities, with much lower operating costs, developed a niche neglected by banks and responded to customer needs. The latter want to have quick and convenient access to additional money if necessary, and non-bank institutions provide it to them.
Many loan companies are classic fintechs. First of all, it operates mainly on the Internet. Secondly, using advanced technologies and extensive scoring models, it automates the client verification process. In this way, it minimizes the risk of financing irresponsible persons. According to this scheme, for example, Aiqlabs, to which the Super Grosz brand belongs.
Additionally, loan institutions enable the submission of an application street customer completely online – at any time of the day or night, without leaving home, without the need to provide documents confirming the source and amount of income or establishing security. They withdraw money even on the same day, using another innovation – instant transfers.
The law forced the profession of the loan sector
However, contrary to appearances, non-bank institutions do not grant loans to anyone willing. The development of analytical departments, the use of external databases (including BIK and its sectoral counterpart Credit-Check) and a large discipline in the granting of loans forced them to change the law.
It is about limiting the maximum non-interest costs. For three years, they may not exceed 25 percent. loan amount plus 30% of this amount calculated annually. However, the Sejm is currently working on further reducing this limit (respectively: 20 + 25).
This made it very difficult for lenders to compensate for poor debt repayment with the higher price of the products offered. – This mechanism forces [on loan companies – ed.] The use of the most effective methods for risk assessment as well as debt collection and securitization – the authors of the report ‘Non-bank loans sector – two sides of the market’ write.
By synthesizing large amounts of data from various sources, loan companies can more accurately assess the customer’s creditworthiness. Thus, they protect many people from aggravating their financial problems.
Non-bank loans as the first choice
The loan sector has entered its maturity phase. This is confirmed by, among others data from the Conference of Financial Companies on the decreasing number of contracts concluded (from 1.06 million in 2016 to 0.77 million two years later), the increasing value of the portfolio (from 1.6 to 2.3 billion in the same period) and increasing average loan amount (PLN 1629 to 2739).
Higher maturity can also be demonstrated by the falling (from 47 to 42%) approval rate in relation to new customers and increasing (to 74%) in relation to returning consumers. In other words: more and more applications from new clients are considered negatively, while the acceptance rate for applications submitted by persons already in contact with a given lender is increasing.
It may also mean that for a certain group of customers, non-bank loans are the basic option when choosing an external source of financing. They are convinced by quick procedures and a minimum of formalities.
Lenders’ websites designed for smartphone users are also doing their job. Loan companies have adapted to the realities in which more than half of internet traffic is generated by owners of mobile devices. Ergonomic sites encourage you to fill out simple forms.