In this deep dive, we analyze the underlying technological and market forces that disrupt traditional financial services in order to project and quantify the impact of a new digital lending environment on established incumbents. We combine insights into financial products, technology, networks and regulation to understand the trends in digitally-enabled loans and the consolidation and expansion required by key players to build lifetime value.

Key Findings 

  • We estimate lending to be a US$2 trillion addressable market in the US and Europe. Additionally, we assume under a 2-year average loan duration that digital lenders could have a 10% market share by 2020 at $100 billion in volume

  • Digital lenders provide a meaningful amount of debt consolidation funding (85% of digital lenders consumer originations). Digital lenders offer yields that are on average 7% below credit cards.

  • Breakdown of the available US$1 trillion in lending in both Europe and the US, depicting the monetary values that can be captured from lending via credit cards, autos, POS credit and consumer.

Table of Contents

About Autonomous Research

Digital Lending: How we got here

  • Differentiation between traditional and digital lenders covering infrastructures, accessibility to data and the middle man in transactions
  • Timeline of the evolution of digital lenders and how the lending landscape for banks has been changing over recent years
  • Areas that traditional lenders have not yet managed to fulfill,  resulting in potential areas of opportunities for digital lenders
  • Quantified the expansion of digital lending firms and the amount of products that are now available

Historic trends in savings rates versus borrowing

Marketplace or Lender?

  • Financial analysis of personal loans and small business products issued by digital lenders compared to traditional banks

  • Analysis of technology underpinning digital lenders and comparison of operating expenses

  • Breakdown and comparison of digital lender network to traditional bank network and solving the many-to-many problem

  • Analysis of regulatory procedures and breakdown of digital loan process

Operating advantage for fully digital players

Lifetime Value over Excess Value

  • Details the difficulty of maintaining excess value in the long-term as incumbents enter the space, something we have seen play out with Goldman Sachs Marcus

  • Discussion of defending lifetime value and focusing on growth after the first loan rather than pushing a second loan product

How to build lifetime value for a B2C neobank or digital lender

Engage with Autonomous

Financial service companies are transitioning from human driven revenue models to information technology driven revenue models. As part of our ongoing focus on this transition, and the core technology themes being expressed in finance, we have established Autonomous NEXT. The products and services are designed specifically for financial firms looking for strategic insight into the pace and path of the core themes shaping the financial services ecosystem.

Our services are suitable only for professional investors. You may purchase this analysis individually, or engage with us more deeply by contacting us here.