Short Description – Consumer credit facilitates spending and economic growth but requires responsible management to avoid debt issues. Understanding consumer credit is essential for making informed financial decisions and managing personal finances effectively. Many start-up businesses from various sectors, such as retail, telecom, and automobile sectors in the emerging countries are expanding their operations and focusing on new product launches, thereby driving the need for credit to a great extent. Moody in partnership with Microsoft has aimed to deliver next-generation data, collaboration, research, analytics, and risk solutions for financial services and global knowledge workers.
Consumer credit refers to the financial arrangement where individuals borrow money from lenders to purchase goods or services, with the agreement to repay the borrowed amount over time, usually with interest. It plays a significant role in modern economies, enabling people to make purchases beyond their immediate financial means and supporting economic growth. Consumer credit comes in various forms, including credit cards, personal loans, auto loans, mortgages, and lines of credit. Understanding consumer credit is essential for making informed financial decisions and managing personal finances effectively.
Consumer credit market forecast –
According to a report published by Allied Market Research, the global consumer credit market size is registered to reach $24.3 billion with a considerable CAGR from 2023 to 2032. A wide array of factors such as expansion of the Internet, rise in use of digital transformation technology, growing adoption of smartphones, numerous benefits provided by consumer lenders, and surge in demand for loans from individuals and small businesses are driving the growth of the market in more than one way.
As per the report, North America is currently dominating the market with the highest market share. The Asia-Pacific region, at the same time, is expected to witness the fastest growth rate during the forecasted period.
Futuristic trends on consumer credit industry –
Digitalization and mobile payments – with the rise of digital banking and fintech, consumers increasingly prefer seamless and convenient ways to access credit through mobile apps and digital platforms. This trend will continue to evolve with advancements in biometric authentication and real time transaction processing.
Personalized financial products – the consumer credit industry will leverage big data and artificial intelligence to tailor financial products and services to individual needs and preferences. This could include personalized interest rates, repayment plans, and credit limits based on spending patterns, credit history, and behavior analysis.
Blockchain and cryptocurrency integration – blockchain technology has the potential to revolutionize the consumer credit industry by enhancing security, transparency, and efficiency in lending processes. Smart contracts could automate loan agreements, while cryptocurrencies may offer alternative forms of collateral and payment options.
Peer to peer lending platforms – peer to peer lending platforms will continue to disrupt traditional banking models by connecting borrowers directly with individual investors. These platforms offer competitive interest rates, quick approval processes, and greater accessibility for borrowers, while providing investors with diversified investment opportunities.
Financial inclusion initiatives – efforts to promote financial inclusion will drive innovation in consumer credit, particularly in underserved communities and emerging markets. Alternative credit scoring models, such as using utility bill payments and social media data, will enable more people to access credit and build credit history.
Sustainable and ethical financing – increasing awareness of environmental and social issues will lead to the development of sustainable and ethical lending practices. Consumers will demand transparency and accountability from financial institutions, encouraging the adoption of green loans, responsible investing, and social impact initiatives.
Robotic process automation (RPA) and AI driven underwriting – automation technologies will streamline credit application processes, reduce processing times, and improve risk assessment accuracy. AI algorithms will analyze vast amounts of data to assess creditworthiness, predict default risks, and offer personalized financial advice to borrowers.
Regulatory compliance and data privacy – heightened regulatory scrutiny and consumer concerns about data privacy will shape the future of consumer credit. Financial institutions will need to invest in robust compliance systems and adopt strict data protection measures to ensure regulatory compliance and maintain customer trust.
Flexible financing models – traditional loan structures will give way to more flexible financing options, such as pay-over-time plans, subscription-based services, and income share agreements. These models offer consumers greater flexibility in managing their finances and aligning payments with their cash flow.
Cross border lending and globalization – as the world becomes more interconnected, consumer credit will increasingly transcend geographical boundaries. Globalization will drive cross-border lending opportunities, international partnerships, and the harmonization of regulatory frameworks to facilitate seamless financial transactions across borders.
Initiatives by key industry players –
Many start-up businesses from various sectors, such as retail, telecom, and automobile sectors in the emerging countries are expanding their operations and focusing on new product launches, thereby driving the need for credit to a great extent. For instance, Yamaha Motor recently made an announcement for the expansion of its robotics business by establishing a new company in Singapore.
Other than business expansion, many companies are adopting strategies like collaborations, partnerships, and acquisitions in order to improve their product offerings, increase the production process, and stay competitive in the market. For instance, Baiduri Bank, Brunei’s leading financial services provider, in collaboration with AI FinTech finbots.ai, a Singapore-based company is modernizing its credit risk management capabilities as part of an initiative to transition core banking to a cloud-based SaaS model. This partnership enables the company to use the cloud based artificial intelligence credit modeling tool for credit scoring, optimizing the credit decision process, which in turn, helps in reduction of operational efficiency. Likewise, Visa collaborated with Royal Bank of Canada (RBC) with an aim to offer eligible RBC personal credit cardholders.
In the meantime, Moody in partnership with Microsoft has aimed to deliver next-generation data, collaboration, research, analytics, and risk solutions for financial services and global knowledge workers. This strategic partnership is likely to improve insights into corporate intelligence and risk assessment. Similarly, Mastercard announced a partnership with Instacart and Peacock to offer greater convenience and everyday value to where it matters most to consumers.
Summing up –
Consumer credit facilitates spending and economic growth but requires responsible management to avoid debt issues. Regulatory oversight and consumer education are essential for its sustainable use amid evolving financial landscapes. Here, it is worth mentioning that the global consumer credit market has a huge scope to gather exponential growth, owing to technological advancements in AI & blockchain, digitalization, customization, regulatory changes, sustainability, and globalization, fostering innovation, inclusivity, and responsible lending process.
Author’s Bio – Suchita Gupta is an explorer, musician and content writer. While pursuing MBA, she found that nothing satisfies her more than writing on miscellaneous domains. She is a writer by day, and a reader by night. Besides, she can be found entertaining her audience on social media platforms. Find her on LinkedIn & Instagram.
