The payday loans sector in Ukraine is developing rapidly, but fast growth does not mean a high-quality market. The number of new players is increasing from year to year. However, although demand is ahead of supply and the potential volume of the market is estimated at billions of dollars, not all companies will be able to compete effectively. What trends need to be considered in 2019 in order to remain competitive?
Mobile technologies and an individualised approach to the client
The payday loan business is definitely moving online. In Ukraine, Internet penetration rates are relatively low – 65% of the population regularly use the Internet and 57% have smartphones. Nevertheless, these numbers are growing rapidly, as is the demand for online financial services. According to Google, the number of search requests in the category “loans and borrowings” for 2018 increased by 30%, while mobile traffic in this category exceeded 55%. This means that the share of online companies will increase and the main platform for communication with the client will be the smartphone.
Moving online means more active use of the benefits that mobile and cloud technologies provide, as well as of artificial intelligence for data processing. This will allow lenders to analyse in detail the behavioral and transactional models, and thus to develop a more individualised approach to each client.
Not all market participants in Ukraine today are willing and able to work correctly and effectively with big data, but this is where the potential for sales growth and investment attraction lies. Powerful analytics allow you not only to assess the current situation, but also to make correct predictions for the future. This is important when working with both borrowers and investors.
More than loans
The growth of online lending has already reached the point where a high-quality technical platform is not enough. Of course, the speed of data processing and making the decision to issue a loan is still a major advantage. However, simplicity and speed is not a bonus, but a standard requirement.
In this race, those who find a way to offer more than “just money” will win. There are so many participants on the market that simple price level competition does not work. In 2019, companies should try to offer the client unique advantages – it can be anything from credit cards to personal financial advice.
One of the main trends is that online lenders are feeling the need to develop long-term relationships with consumers. Simple transactional business models are no longer relevant, because innovations in this area have already surpassed the limits of standard credit terms. The cost of attracting and retaining customers leads to a business model in which lenders can offer growing credit lines, instead of having to go through the loan process from the very beginning every time.
Reputation is a key asset
Banks were early adopters of online tools and are now entering the payday-style online lending space. In 2019, this trend will only intensify. Banks will continue to push into the online payday loans market by implementing digital apps. Their well-established reputation will allow them to successfully compete with alternative lenders who already work in this ecosystem.
That is why the question of reputation is relevant to the field of microcredit. The level of confidence in the microfinance sector is low, because of an inadequate degree of financial literacy among the population and a lack of methods for working with problem loans. Nonetheless, the situation is changing, and online lenders should integrate financial education tools into their work.
We need to find ways to create additional value for our customers, explore new niches and create alternative loan products. The main trends are focused, on the one hand, on maximising product personalisation and, on the other hand, on universality, in the sense of the ability to act as a single financial instrument for solving problems.
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