Lending is one of the industries still inexplicably tied to paper. But companies are going paperless across industries. This trend is impacting lenders, and blockchain could accelerate the change.
Blockchain-stored on the blockchain are shareable and secure. The blockchain is an ideal system for storing a customer’s documents or sensitive information.
The lending industry has homed in on mortgages as the test case for blockchain adoption. Blockchain ledgers work great as a single source for storing and accessing files pertaining to a home loan. Lenders are increasingly deploying these shared ledgers in mortgage processes.
Because lending is so contract-based, blockchain technology could work wonders. Unified shareable records reduce the burden of file storage for each lender. The customer also spends less time rounding up financial documents when lenders can share files amongst themselves.
Shared information in the mortgage lending process is one of the foremost trends for blockchain in lending, though it’s not the only one.
Here’s how experts see the blockchain trends shaping the lending sector.
1. Blake Cohen, Co-founder of SALT Lending
“The top trend that will shape the blockchain lending industry is product quality. Customers will be more educated and will begin to understand and identify which lenders are credible, have quality solutions for collateral storage, comply with regulations, and have outstanding customer service. As customers become more familiar with the blockchain lending landscape, they will develop different needs and higher standards. And they will seek out the companies that predict their needs and provide them with solutions to problems they didn't realize they had. As a result, players in the space will need to strive for the highest quality product offerings in order to stay in the game.”
2. Alex Faliushin, CEO and Co-founder of CoinLoan
“We suppose that the main trend is market globalization and blurring of boundaries that allow us to lend and borrow without regard for a specific country and currency. Moreover, users from such different countries as, for example, Estonia and India can interact quickly and very profitable.
I'm talking now not only about companies but also about individuals. It’s impossible to imagine such a situation without blockchain.”
3. Steve Swain, CEO and Founder of Lendingblock
“One of the main trends shaping blockchain in lending is that we are beginning to see a more mature market develop. Regulations in a number of jurisdictions are starting to take shape. Larger financial institutions are starting to invest into and launch blockchain-based products and services. The industry is beginning to grow up. 2019 could prove to be a pivotal year in more mainstream and institutional adoption of lending and other blockchain-based technologies.”
4. Anil Awasthi, VP, Global Head of Retail Banking, Virtusa
“The lending business is significantly contract based and legally sensitive throughout the lending lifecycle. Current lending business processes involve significant amount of paperwork, which are held securely throughout the loan tenure. The documents involved in these processes include – mortgage notes, auto loans and asset leasing contracts, which have an associated value tied to them. If these documents are destroyed, their value is completely lost. Blockchain along with smart contracts can add real value to hold a single digital and reliable asset across the lending lifecycle. This year, the financial services industry would explore blockchains true potential by moving from paper-based contracts to single authoritative digital copies of these loan documents.”
5. Darshan Bathija, CEO and Founder of Bank of Hodlers
“We might see a surge in the number of people seeking crypto-backed loans. If you take the case of MakerDAO: Maker DAO did 26 million USD of loans in November 2018, 30 million in December 2018 and 35 million in January 2019 – and they only support Ethereum. Ethereum is only the third largest cryptocurrency.”
6. Anzhelika Osmanova, CEO of Lendonomy
“I think that digital nomadism will in many ways affect the lending blockchain businesses from the use case perspective. Because people travel so much these days, the need for cross-border lending and movable, verifiable credit history increases. If I studied in the States and had my credit history in the States, that should not stop me from getting a loan at good terms when I move to Europe for work, and vice versa. I think that more and more lending companies will start understanding that and will begin to introduce more services related to helping customers build a global credit history instead of a local one.”
7. Joe Kelly, CEO and Co-founder of Unchained Capital, Inc
“I expect more crypto-collateral lending to take place, as well as more of the related activities such as loan sourcing and lending capital raising to occur through blockchain mediated platforms. For example, you may see more securities tokens that are investment vehicles for investors who want access to yields from these loans.”
8. Zac Prince, CEO of BlockFi
“Adoption! The crypto market grows at breakneck spends and lending / debt / credit has been largely missing or siloed within the ecosystem. Expect to see multiple companies start to scale and bring critical financial infrastructure to the space.”
9. Vitaly Bahachuk, Co-founder of Bloqboard
“The risk models designed by each protocol to maintain stability will shape the flow of funds into the lending sector. Determining factors include which assets are whitelisted, collateral requirements, and incentives for the class of actors managing the margin mechanisms.”
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