# Lending is behind the times – the need to modernise
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2022-08-12
Category: FINANCE
Category URL: https://financedigest.com/category/finance
Meta Title: Rethinking Lending: Adapting to Financial Pressures
Meta Description: Discover how Marqeta is disrupting the current lending model, offering innovative solutions to help consumers navigate financial challenges and access the
URL: https://financedigest.com/lending-is-behind-the-times-the-need-to-modernisehtml

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_By_ **_Anna Porra,_** _European Strategy Director at_ [_Marqeta_](http://www.marqeta.com/)

The past two years have been unprecedented for both consumers and businesses who have been navigating the lasting effects of the pandemic, while cost-of-living and financial pressures are continuing to build. Many consumers may look to banks and lenders for financial aid and advice during these trying times, but a new approach to lending may be necessary if banks are to help consumers get the financial support they need.

**[Challenges in access](https://www.financedigest.com/poor-access-to-skills-and-regulatory-challenges-halts-uk-innovation.html "Poor access to skills and regulatory challenges halts UK innovation") to lending**

[Financial wellbeing is top of mind for many consumers](https://www.financedigest.com/uk-consumer-mood-hits-one-year-high-but-financial-gloom-persists.html "UK consumer mood hits one-year high, but financial gloom persists") as they feel the pinch of rising costs, but many don’t know where to turn. Access to finance has never been more important but [Marqeta’s research](https://www.marqeta.com/uk/lending-3-0-research) found that only 55% of respondents know what their options are if a loan is denied. And with the [Office for National Statistics](https://www.ons.gov.uk/peoplepopulationandcommunity/wellbeing/articles/worriesabouttherisingcostsoflivinggreatbritain/apriltomay2022) finding that 77% of respondents over the age of 16 reported feeling “very or somewhat worried about the rising cost of living”, there is clearly a disconnect between financial services and consumers.

This is in part because of the [loan process](https://www.financedigest.com/montenegro-eu-admission-process-paved-by-loan-from-brussels.html "Montenegro EU Admission Process Paved by Loan from Brussels") itself, which involves a high degree of self-reporting and lengthy credit checks. This process can not only take months to complete, but it is also littered with confusing terms. In our lending survey, [75% of respondents](https://www.marqeta.com/uk/lending-3-0-research) say they “switch off” when prospective lenders use industry jargon and 80% of respondents believe that lenders often try to obscure the final cost of the loan.

If consumers do manage to tackle the complicated process of getting a loan, many still feel frozen out of the lending bubble, and are often held back by outdated lending criteria and assessments – such as [credit scores](https://www.financedigest.com/12-things-that-dont-hurt-your-credit-score.html "12 Things That Don’t Hurt Your Credit Score"). Often, those who are denied a [loan either don’t know](https://www.financedigest.com/home-equity-made-simple-things-to-know-before-applying-for-loans.html "Home Equity Made Simple – Things to Know Before Applying for Loans") where to turn or have to resort to less affordable options, like payday loans.

Under the current system, one person who is living frugally, paying rent, and saving for the future, could be put into the same [box](https://www.financedigest.com/de-montfort-place-ticks-every-box-for-first-time-buyers-in-bedford.html "De Montfort Place Ticks Every Box For First Time Buyers In Bedford") as someone living at home and going out every weekend spending every penny – the two are not the same. This is a sign that the current system is broken and needs to change.

[**Disrupting the current lending model**](https://www.financedigest.com/learning-from-the-disrupters-how-finance-brands-can-build-transformative-business-models.html "Learning from the disrupters – how finance brands can build transformative business models")

It is against this backdrop that we’re starting to [see the lending industry](https://www.financedigest.com/airline-body-iata-sees-industry-recovery-now-in-2023.html "Airline body IATA sees industry recovery now in 2023") modernise. The rise of [alternative finances](https://www.financedigest.com/demystifying-alternative-finance.html "DEMYSTIFYING ALTERNATIVE FINANCE"), such as Buy Now, Pay Later (BNPL), is making the lending space more accessible and convenient. We’re also seeing real-time data alerts give consumers more control over how they [spend their money](https://www.financedigest.com/student-finances-exposed-how-do-they-really-spend-their-money.html "Student finances exposed: How do they really spend their money?").

The uptake of BNPL has been transformational for many consumers who want to better [manage their finances](https://www.financedigest.com/how-parents-can-help-students-manage-their-finances.html "How Parents Can Help Students Manage their Finances"). But there is demand for BNPL to expand into other areas of spending,  including larger expenditures such as vehicle repairs, with [63% of consumers](https://www.marqeta.com/uk/lending-3-0-research) keen to see BNPL extended to one off items like white goods. In industries that have traditionally been less accessible, because of barriers such as paper forms or APRs, BNPL has the potential to smash these wide open.

The lending [industry has the potential to take this leap into modernisation and personalisation](https://www.financedigest.com/one-size-does-not-fit-all-customer-personalisation-in-the-finance-industry.html "One size does not fit all: customer personalisation in the finance industry") even further. Emerging technologies such as cryptocurrency, [NFTs and gaming](https://www.financedigest.com/what-is-nft-gaming.html "What is NFT gaming") are becoming more commonplace in consumer’s everyday lives, and there is also an appetite for these to be incorporated into lending. We found that [49% of consumers](https://www.marqeta.com/uk/lending-3-0-research) surveyed would or have already taken out a cryptocurrency-backed loan, and 69% of NFT owners surveyed would be open to using their assets as collateral for a better loan. There is clearly a [demand from consumers](https://www.financedigest.com/lights-maker-signify-cuts-annual-outlook-on-lower-consumer-demand-china-woes.html "Lights maker Signify cuts annual outlook on lower consumer demand, China woes") for innovation with lending, and so now is the time for industry to take this opportunity.

**The future of lending**

Consumers are facing a lot of uncertainty, but what is certain is that they are going to [need more help from banks](https://www.financedigest.com/bank-of-england-still-needs-to-see-the-job-through-on-inflation-pill.html "Bank of England still needs to ‘see the job through’ on inflation: Pill") and lenders. To meet these needs, an [important step is for the current lending industry to modernised](https://www.financedigest.com/5-reasons-why-modernising-is-the-most-important-ongoing-process-for-any-business.html "5 Reasons Why Modernising Is The Most Important Ongoing Process For Any Business"). We are starting to see more alternative [finance options](https://www.financedigest.com/7-finance-career-options-to-consider-and-what-you-need-to-know-about-each.html "7 Finance Career Options to Consider and What You Need to Know About Each"), such as BNPL, enter the market which are helping making the lending space more inclusive and accessible. Lenders are also beginning to see the value in providing customers with real-time [data and insights which can allow them to gain better control](https://www.financedigest.com/dollar-buoyant-as-robust-u-s-data-keep-fed-hawks-in-control.html "Dollar buoyant as robust U.S. data keep Fed hawks in control") over their finances. But it is important that lenders continue this drive towards modernisation and digital transformation to support consumers as they seek to [improve their financial](https://www.financedigest.com/5-ways-to-improve-your-financial-literacy.html "5 Ways to Improve Your Financial Literacy") wellbeing and remove the stress related to lending.


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