Digital lending is a loan service
carried out through online platforms such as applications and websites, and which
uses alternative data other than information from bank statements or income for
credit approval while using AI technology or Big Data Analytics to speed up the
credit approval process. Digital lending services are aimed at serving new
customers who have limited or no access to the financial services of main financial
institutions such as self-employed individuals, temporary workers and traders
with unstable income, as well as fixed income earners with middle-to-low income
and others. The financial services they are eligible for come mainly in the
form of personal loans and business loans that do not require collateral or
personal guarantees.
Digital
lending services in Thailand are still in their infancy and are modest in scale,
as digital lenders lack sufficient customer data for risk assessment; therefore,
most digital lenders choose to provide loans to existing borrowers with a good
repayment history and new borrowers with steady income or clear account
statements. Digital credit providers tend to grant 1-3 month short-term loans
with small credit lines and high interest rates. These loans are suitable for general
customers seeking emergency cash for consumption or micro enterprises that need
emergency funding as working capital for businesses. By and large, the digital
lending market value in Thailand remains insubstantial. KResearch projects that Thailand is likely to
see digital lending outstanding of approximately THB 12.0 – 12.5 billion in
2020, which represents 0.2 percent of total retail loans in the system.
There
are large opportunities for digital lending service providers to expand their
customer bases by focusing more on marketing to capture new target customers once
Thailand's economy begins to emerge from the present COVID-19 crisis. To do
that, two driving factors are required: the first involves expanding the scope
of data usage further into alternative data when granting loan approval, such
as utility payment information, mobile phone usage behavior, and online
platform trading behavior; the second is investment in related technology by
operators in the digital lending market, including existing lenders and new non-bank
service providers or fintech companies, in order to expedite the credit
approval process and to broadly serve new target customers.
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