Lower demand for loans, higher defaults, and the growing risk of further shocks to the global financial system are forcing banks to expand and enhance their lending offerings.
Lending has been the foundation of the banking business for centuries. But now the volatility sweeping the global economy is forcing banks to develop an array of new lending solutions.
"Banks need to constantly innovate and transform themselves to adapt to the changing global economic landscape,” says Ram Devanarayanan, associate vice president and head of business consulting in Europe and UK at Infosys Finacle.
Stalling global GDP growth, at around 3%, rising inflationary pressures, and the prospect of tighter monetary policies around the world are fueling macroeconomic uncertainty, says Devanarayanan. Furthermore, global leverage at US$250 trillion is near an all-time high while worldwide credit losses look set to rise 7% to US$850 billion this year. These indicators point to more upheaval.
Banks should brace themselves for lower loan demand, higher defaults and further shocks to the global financial system. It’s essential that they review their business models and technology resources and develop lending solutions tailored to changing market conditions and new customer needs, warns Devanarayanan.
He was speaking at an online event hosted by Qorus and Infosys Finacle that examined key trends transforming lending. Representatives from Portuguese bank Millennium bcp, and Alliance Bank Malaysia also shared insights into new lending trends among banks, neobanks and other finance providers.
Devanarayanan highlighted three aspects of banking that institutions should address when creating new lending solutions – business model innovation, advanced technologies, and inclusive and sustainable lending.
