Canada is quickly becoming a force to be reckoned with in the alternative lending industry. Numerous firms within our borders have achieved widespread success and recognition, and the landscape of Canadian lending has felt significant effects thanks to these innovators. Today’s blog looks at the factors that have made a few of Canada’s top alternative lenders stand out, and what has brought them to the fore among an increasingly crowded market of fintech-savvy entrants
So, what makes a great alternative lender? We can look to the Alternative Lending in Canada Survey of 2018 conducted by the independent website Smarter.Loans for some interesting answers.
Find, Inform, and Do It Fast
According to survey data, Canadians are fairly thorough researchers when it comes to looking for alternatives to a bank loan. With so many new vendors, most Canadians are researching between 5 and 10 different options before they apply for an alternative loan across different loan types such as personal, business and mortgage. Some 62% of respondents discovered the provider they ultimately applied with via online search. Another 13% found their provider on social media, and 10.5% discovered the company they sent their application to through a personal recommendation. The majority of borrowers also send out multiple applications to competing lenders before settling on a final agreement. However, less than half of searchers spend very much time on this research (less than three hours in total.)
Clearly, the advantage in the alternative lending space is going to firms who know their audiences best, and know how to reach them with relevant information on the platforms that matter to them most in a short amount of time – adapting to the “shotgun” search approach that many borrowers appear to take. Lenders that can provide concise, relevant and easy-to-understand information about their services through easily accessible platforms are going to continue to be able to make significant inroads into the market.
It’s About the Rates
Unsurprisingly, the most important factor for consumers when dealing with a lender according to this survey was the favourability of interest rates and terms. While this seems like a fairly self-evident conclusion, it underscores the work that Canadian firms are doing to enhance their internal processes and improve their rate calculation models with more advanced data-driven methods. The most successful Canadian alternative lenders will have to continue finding ways to innovate in order to provide customers with the best possible rates while maintaining sustainable operations.
As with most new tech-driven business models, alternative lending has had its share of difficulties with getting prospective users to trust their practices. This difficulty is compounded by the atmosphere of negativity and occasional outright misinformation that often surrounds the traditional “alternative” to bank loans, represented as it has been for many years by the Payday Loans industry. Overall, 43% of respondents to the Smarter.Loans survey would consider going back to a bank after dealing with an alternative lender, and 38% remained unsure. At the same time, borrowers in the youngest demographic, which comprises the industry’s future customers, were most skeptical about borrowing money online, with 70% not believing that it is safe and scam free.
Overall, respondents were nearly split on whether they believed loan providers are transparent about their fees, interest rates, terms and conditions. Furthermore, more than half believe the industry isn’t entirely safe and free of scams. Transparency and trustworthy business practices will likely be the last major components of business strategies that are employed by Canada’s most successful alternative lenders.
At Progressa, we’re putting the work in every day to improve all the aspects of our model: from the rates we can offer, to the effectiveness of our analysis, to the ease of use that lets you get a loan quickly and without complicated application requirements, all the way down to the organizational level where we strive to be as open and transparent as possible about what we do. And new changes are always happening as we strive forward to these goals!