Market Insights

Market Overview
The United States Digital Lending Market is estimated to grow at a CAGR of 11.4% during the projected period.
(2022 - 2027). Due to the COVID-19 epidemic, SMEs in the region have difficulty acquiring financing to keep
their operations running amid the crisis. Digital lending is projected to find various chances for development
and acceptance, particularly among SMEs. Furthermore, the government intends to assist the population
throughout the COVID-19 epidemic.

 Digital lending platforms are transforming the face of business lending by providing more on-demand
services and making speedier judgements. However, digital tactics vary as banks adapt their
operations to compete online. While digital disruptors have been focusing on making single loan
applications easier, traditional banks may be missing a trick by digitising only the regular sections of
their commercial lending operations.
 Because of its early adoption of digitisation in multiple areas, the United States is one of the world's
largest and most sophisticated marketplaces for digital lending. Furthermore, factors such as the
region's strong economy, the presence of prominent solution providers, and significant investment by
government and private organisations in the development and expansion of research and
development activities are expected to drive demand for digital lending in the region.
 Funding is an important component of the digital lending business strategy. Digital lenders employ
three key funding models: marketplace lenders, balance sheet lenders, and bank channel lenders. As
they expand, some digital lenders have used a variety of funding sources.
 Furthermore, financial institutions maintain key competitive advantages. The ability to access insured
deposits, which provide low-cost capital, is arguably the most significant. Banks are likely to be
hesitant to accept new technology due to regulatory issues, but banks are increasingly seeking for
ports of entry into the fintech market. Many banks are anticipated to collaborate with established
fintech businesses to combine their cost advantages with fintech's technological skills.
 These collaborations might help banks to deliver more efficient client experiences at cheaper rates
and reach previously untapped consumer segments by combining their technical knowledge with
banks' lower cost of capital. Furthermore, in the United States, credit origination systems may be
subject to licencing regulations in each state. For this reason, many platforms partner with banks to
originate loans agreed-upon online.

Types of Loans in US Market

 Personal Loans
 Auto Loans
 Student Loans
 Mortgage Loans
 Home-Equity Loans
 Credit Builder Loans
 Debt Consolidation Loans
 Payday Loans
 Small Business Loans
 Title Loans
 Pawnshop Loans
 Boat Loans
 Recreational Vehicle Loan
 Family Loan
 Land Loan
 Pool Loans

Industry Stakeholder Analysis

1. Borrowers: Individuals and businesses seeking loans from digital lending platforms
 2. Digital Lending Platforms: Companies that provide loans through their websites or mobile applications,
such as peer-to-peer (P2P) lenders, online-only lenders, and fintech startups.
3. Investors: Individuals and institutions that provide funding for the loans originated by digital lending
platforms, such as pension funds, hedge funds, and retail investors.
4. Regulators: Government agencies responsible for overseeing the digital lending industry, such as the
Consumer Financial Protection Bureau (CFPB) and the Federal Reserve.
5. Payment Processors: Companies that facilitate funds transfer between borrowers and lenders, such as
PayPal and Stripe.
6. Data Providers: Companies that provide data to digital lending platforms to assist in underwriting and
risk assessment, such as credit bureaus and alternative data providers.
7. Technology Providers: Companies that provide technology solutions to digital lending platforms, such
as cloud computing providers and software companies

Office of Comptroller of the

Consumer Financial Protection
Bureau (CFPB): Responsible for
protecting consumers in
financial marketplace
Federal Reserve System:
Responsible for Supervising
banks, including digital lenders
affiliated with banks
Currency (OCC): Responsible
for chartering, regulating and
supervising all national banks,
along with compliance with
other laws

Securities and Exchange

Federal Deposit Insurance
Corporation (FDIC):
Responsible for insuring
deposits in banks
Commission (SEC): Responsible
for regulating securities
markets, including digital
lending platforms offering
securities-based loans.

Industry Attractiveness -Porter’s Five forces Analysis

Bargaining Power of Suppliers
Bargaining Power of Consumers
Threat of new Entrants
Intensity of Competitive Rivalry
Threat of Substitute Products
Digital Lending and Regulatory Environment (Fintech Laws in the US)
1. The Gramm-Leach-Bliley Act (GLBA): This act requires financial institutions to protect consumers'
financial information and give consumers privacy notices explaining their information-sharing
practices.
2. The Electronic Fund Transfer Act (EFTA): This act establishes the rights, liabilities, and responsibilities
of consumers who use electronic fund transfer services, such as direct deposit and electronic bill
payment.
3. The Truth in Lending Act (TILA) requires lenders to disclose credit terms and the cost of borrowing to
consumers in a standardised manner.
4. The Equal Credit Opportunity Act (ECOA): This act prohibits discrimination in lending based on race,
colour, religion, national origin, age, sex, or marital status.
5. The Bank Secrecy Act (BSA) requires financial institutions to assist U.S. government agencies in
detecting and preventing money laundering.
In addition to these federal laws, there are also a number of state laws that apply to digital lending in specific
states. Some states, such as New York and California, have established specialized licensing regimes for digital
lenders, such as the New York State Department of Financial Services' BitLicense and the California
Department of Business Oversight's Money Transmission License.

Recent Developments in US Digital Lending Market

 August 2022 - Arc Home LLC (Arc Home), a full-service residential lender and servicer with operations
in the wholesale, correspondent, and retail origination channels announced the selection of Tavant to
accelerate its digital transformation plan. Tavant is a market-leading supplier of digital lending
solutions situated in Silicon Valley. Arc Home, a major national lender offering a full range of
mortgage options, places a premium on the client experience, which is partly dependent on efficient
operations.
 July 2022 - In addition to its current commitment to Minority Depository Institutions (MDIs) with the
National Bankers Association, Upstart, a leading artificial intelligence (AI) lending marketplace, has
announced that all Community Development Financial Institutions (CDFIs) nationwide will have
preferred access to its AI lending platform with no implementation fees. The news comes as Upstart
becomes a founding member of the Economic Opportunity Coalition. This new group is collaborating
with the Biden-Harris Administration to find strategies to create economic equity in the United States.

Market Drivers
Disposable Income trends
 Real Disposable Personal Income, Billions of Chained
2012 Dollars, Monthly, Seasonally Adjusted Annual Rate
20000.0
18000.0
16000.0
14000.0
12000.0
10000.0
8000.0
6000.0
4000.0
2000.0
0.0
01 01 01 01 01 01 01 01 01 01 01 01 01 01 01 01 01 01 01 01 01 01 01 01 01 01 01 01
01- 05- 09- 01- 05- 09- 01- 05- 09- 01- 05- 09- 01- 05- 09- 01- 05- 09- 01- 05- 09- 01- 05- 09- 01- 05- 09- 01-
- - - - - - - - - - - - - - - - - - - - - - - - - - - -
59 61 63 66 68 70 73 75 77 80 82 84 87 89 91 94 96 98 01 03 05 08 10 12 15 17 19 22
19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 20 20 20 20 20 20 20 20 20 20

The above data shows that there has been a steady and significant rise in the real disposable income per capita
in American Households which is a good indicator of spending as well as the rise in potential lending and need
of easy to use, scalable, proven digital solutions.

Number of Potential Loan Purchasers with “Digital Inclination”

 According to the US Small Business Administration, there are USD 4 trillion in outstanding consumer
loans for small companies in the US, and USD 310 billion in sub-USD 1 million loans to small firms.
Furthermore, the US Federal Reserve Bank of New York believes that there is around $100 billion in
unmet credit demand as a result of banks' hesitancy to issue small-dollar loans. Technology-driven
digital lenders are gaining traction due to their capacity to collaborate with banks to satisfy untapped
demand.
 The majority of customers use fintech services to repay or consolidate current loans, although others
utilise them to fund large purchases (such as vehicles or real estate). Borrowing for higher education
by students is common in the United States.
 Various small and micro businesses often need funding for operating capital or investment initiatives.
Financing can also take the form of invoice trading, in which investors buy reduced claims on a
company's invoices (receivables). In most locations, SMEs make a substantial contribution to the
economy. The following statistics support the above assertion: More than half of all Americans own or
work for a small business, according to the US Small Business Administration (SBA).

Federal Debt: Total Public Debt, Millions of Dol-

lars, Quarterly, Not Seasonally Adjusted
35000000
30000000
25000000
20000000
15000000
10000000
5000000
0
1 1 1 1 1 1 1 1 1 1 1 1 1 1
-0 -0 -0 -0 -0 -0 -0 -0 -0 -0 -0 -0 -0 -0
- 01 - 07 - 01 - 07 - 01 - 07 - 01 - 07 - 01 - 07 - 01 - 07 - 01 - 07
16 016 017 017 018 018 019 019 020 020 021 021 022 022
20 2 2 2 2 2 2 2 2 2 2 2 2 2
Source: St. Lois Fed https://fred.stlouisfed.org Federal Reserve Economic Data
Consumer digital lending trends in USA
 The IPO of consumer loan-focused GreenSky Inc. drew particular attention to bank channel-based
lending. The firm has secured bank pledges of more than USD 11 billion. OnDeck, a small company
lender, has expanded its OnDeck-as-a-Service platform, through which it licences its technology to
banks. PNC Bank was joined as a customer, and a new subsidiary, ODX, was formed to handle future
bank channel-based business. Avant has introduced Amount, a bank collaboration platform for
personal loans.
 To maintain their growth, digital lenders are seizing possibilities to broaden the scope of their
activities, both in terms of finance and product offers. SoFi, which began as a student loan refinancing
firm, now now provides personal loans and mortgages. Personal loan-oriented LendingClub also
provides a business loan. While some businesses, such as Square and PayPal, joined digital lending
from adjacent fintech areas, some lenders take a different approach by providing nonlending services.
SoFi has been the most active in this regard, providing wealth management services and taking
applications for its high-yield deposit account product, SoFi Money.
 Student-focused lenders continue to be the most diverse platforms in the digital lending business, as
student loan firms attract fresh investment and clients as the area grapples with a persistent student
loan debt issue. The Federal Reserve estimates that student loan debt in the United States is about
USD 1.7 trillion. Students graduate with an average of USD 29,000 in private and federal student debt
and a 15% loan default rate.
 The cloud is one of the most important developments in digital lending because of its ability to aid
financial institutions with service delivery, document management, information storage, and data
processing online. It's easy to see why, according to Accenture, more than 90% of banks now have at
least some workloads running in the cloud.

Household Debt to GDP for United States, Ratio,

Quarterly, Not Seasonally Adjusted
120.00

100.00

80.00

60.00

40.00

20.00

0.00
01 01 01 01 01 01 01 01 01 01 01 01 01 01 01 01 01 01 01 01 01 01 01 01
01- 10- 07- 04- 01- 10- 07- 04- 01- 10- 07- 04- 01- 10- 07- 04- 01- 10- 07- 04- 01- 10- 07- 04-
- - - - - - - - - - - - - - - - - - - - - - - -
05 05 06 07 08 08 09 10 11 11 12 13 14 14 15 16 17 17 18 19 20 20 21 22
20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20
Source: St. Lois Fed https://fred.stlouisfed.org Federal Reserve Economic Data
Market Challenges
Market Segmentation
Business Digital Lending
Consumer Digital Lending
Competitive Landscape
Company Profiles
Bizfi LLC
On Deck Capital Inc
Social Finance Inc.
Prosper Marketplace Inc.
Brigit
Investment Analysis and Market Opportunities
Investment Opportunities and Recommendations