The Impact of Finance Technology in the Modern World

With much of the world in lockdown, almost everyone has had to adapt their lifestyle in some way to continue being productive, businesses and consumers alike. This has led the way for technology to match the growing needs of the stay-at-home consumer.

Many technologies were well in use before the lockdown was initiated, such as Zoom and Slack, but have rocketed in popularity in the way that communication can continue from the comfort of your home.

Businesses are taking advantage of such communication technologies, but how does this translate over into the finance world? Much like communication software, many of the ‘changes’ were already evident in the sector.

Consumer empowerment

From open banking, whereby bank information at your consent is shared via an approved third party for transfers to challenger banks offering arguably better services than most high street banks, the financial landscape is changing rapidly. This is giving consumers more power when it comes to their financial future.

This extends beyond personal finance, with changes afoot across the entirety of the financial sector. Focussed start-ups and online based companies are disrupting all areas of finances, from lenders to the consumer credit market.

Put simply, the growing requirements of the modern consumer, particularly those of a younger demographic align very closely with the changes required to stay active in the market during the lockdown.

Beyond the lockdown, consumers lifestyles are changing, and businesses are already making the shift. One in three younger people (36%), those under the age of 24, chose to borrow from an alternative lender, with almost two thirds (64%) saying they would consider an alternative lender if they needed to borrow. Competition is increasing in the market, and existing lenders are adapting.

Lenders are adapting

Just a few years ago, the idea of lending on a large scale would be unheard of without a face to face meeting. However, the market is adapting to the current situation quickly with valuations continuing to take place and advisers endeavouring to stay properly connected with their clients.

Taking mortgage lenders as an example, the adoption of an Automated Valuation Model (AVM) and desktop valuations to lend up to 90% of loan to value is important in helping the market continue. We are continuing to see more covid-19 ‘hubs’ emerge, keeping advisers up to date on the latest product changes.

In addition, with the Financial Conduct Authority (FCA) also releasing information that confirmed firms can use electronic signatures during the coronavirus outbreak for completions and the Equity Release Council temporarily allowing virtual legal advice, lenders have responded quickly to the needs of those in the market to keep it ticking.

Lending activity is increasing

When the UK first went into lockdown, the number of mortgages plummeted in the opening few weeks. However, with signs that activity is increasing in the market, product numbers are stabilising, and we are seeing more lenders re-enter the market with additional offerings.

Along with the decisions implemented by Government, regulators and importantly lenders are doing their part to keep the market moving. Automated valuations and taking advantage of communication technology in video calling software has been evidence of the versatility required.

Alternative lenders will rise

With rumours emerging of construction returning in the coming few weeks, investment in property should be set to rise too, with debt investment becoming an increasingly necessary component to keep the construction industry moving.

Traditional lenders are likely to be more risk adverse as we come out of lockdown and the subsequent economic downturn, so many construction firms will turn to alternative lenders to raise capital. With the Government in support of more housing being constructed, this will be essential in preventing further adverse effects of an undersupply of housing.

The UK is already in a housing crisis, with the Government pre-lockdown pledging large sums of money to produce and provide the required housing to those that vitally need it across the UK. The effects of the lockdown will not change this.

More can still be done

Whilst the above is a massive step in the right direction, technology can still be better utilised in the world of finance. A recent survey showed that less than one in five (19%) of those in the field felt that themselves or the company they work for had best utilised technologies available.

With only 24% saying they felt connected to their team, the adoption of technologies needs to become more widespread in its use. With no date given regarding the end of the lockdown, we must assume we are in it for the long haul. With many businesses likely to implement a remote working environment even with restrictions lifted, it is important that all businesses, small and large, adopt relevant technologies in the finance sector.

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