The digital lending sector is on the brink of unprecedented growth, with projections indicating a market value of USD 795.34 billion by 2029, according to a report by Singapore-based fintech company ROSHI. This growth, characterized by a compound annual growth rate (CAGR) of 11.90%, is largely driven by technological advancements such as artificial intelligence (AI), peer-to-peer (P2P) lending, and decentralized finance (DeFi).
AI's role in enhancing credit risk assessment is a game-changer, with AI-powered models expected to outperform traditional methods by 10-15%. This leap in technology promises more accurate lending decisions and broader access to credit. Meanwhile, the P2P lending market is projected to exceed US$705.81 billion by 2030, growing at a CAGR of 26.7% from 2022 to 2030, reflecting a shift towards more flexible and competitive lending options.
DeFi is another area witnessing explosive growth, with the market expected to expand at a CAGR of 46.0% from 2023 to 2030. This surge highlights the potential of blockchain technology to redefine lending practices and enhance financial inclusion. Additionally, open banking is gaining momentum, with 13% of digitally active consumers in key European markets using open banking services by January 2024, paving the way for more personalized lending products.
Amir Nada, ROSHI Founder and CEO, remarked on the transformative potential of these trends, emphasizing the rapid evolution of financial services. The report also touches on the rise of green loans and the importance of personalization in lending, indicating the industry's responsiveness to consumer needs and environmental concerns.
However, the rapid advancement of digital lending poses regulatory challenges, necessitating adaptive policies to safeguard consumers and ensure financial stability. For traditional financial institutions, the message is clear: adapt to digital transformation or risk obsolescence. Consumers, on the other hand, stand to gain from improved access to credit and more tailored financial products, though navigating this evolving landscape will require enhanced financial literacy.
As the digital lending market marches towards the $795 billion milestone, its impact on the global financial ecosystem is undeniable. The ROSHI report serves as a critical resource for stakeholders, offering insights into the opportunities and challenges that lie ahead in this dynamic sector.
