Consumers ask for more clarity from alternative lenders
The pandemic has prompted a shift in consumer attitudes, with more seeing alternative finance as an option.
But lenders risk being left behind if they do not address customer concerns around a lack of clarity and personalisation, according to a new study.
Nearly 60 per cent of those in a survey of 2,000 European consumers said their eyes have been opened to alternative finance. This goes up to 71 per cent for respondents aged between 18 and 34. The survey was conducted by Propeller Insights on behalf of card issuing platform Marqeta.
However, there are still parts of the alternative finance world struggling to get the attention of consumers, such as peer-to-peer lending.
According to the survey, buy-now-pay-later is the best-understood alternative finance option, with 77.6 per cent of respondents having a good understanding of the service. In contrast, 47 per cent of respondents do not know what P2P lending is and only 15 per cent have actually used it.
Read more: P2P sector smashes milestones in 2022
Lack of clarity
The study found that many consumers are frustrated with how outdated the lending industry is and have said that it is a decade behind online banking. In particular, the use of jargon has put off many customers, with 75 per cent of respondents saying they switch off when it is used.
There were also complaints about lenders obscuring the final cost of a loan and over the length of time it takes for money to come in once a loan has been accepted.
Read more: P2P lending complaints continue to decline
“As the cost-of-living crisis continues and consumer confidence hits an all-time low by certain metrics, many will be looking to loans as a source of help,” said Anna Porra, European strategy director at Marqeta.
“But our survey shows that more education on alternative options is needed. Unless consumers understand the options available to them, they may struggle to access much needed finance or be forced to look at more expensive options.”
Around two thirds of respondents want a relationship with their lender, while 69 per cent are interested in real-time data alerts. Of those surveyed, 61 per cent want real-time loan advice from their provider.
Desire for new products
The majority of consumers, some 75 per cent, are also interested in responsible lending options, with 54 per cent saying they would pay a monthly fee for more ethical options.
New technologies, such as cryptocurrency and non-fungible tokens are also creating interest among consumers, 49 per cent of which have said they would or would be open to take out a cryptocurrency loan.
“The writing is on the wall for traditional lenders. Consumers increasingly want and expect the levels of modernisation and personalisation that they have become accustomed to in other aspects of their lives,” Porra said.
“Our survey has shown that, if lenders can educate customers and provide clarity on alternative finance, there is real appetite for innovation within lending. The younger generation in particular are showing real interest in exploring emerging technologies, presenting an opportunity for lenders to lead the crowd.”
Read more: P2P lending tipped as top asset for 2022
