Legacy IT Systems Lose U.S. Lenders $407 Million Every Year, Reveals New Divido Research

Legacy IT Systems Lose U.S. Lenders $407 Million Every Year, Reveals New Divido Research
12.06.2019 07:09 am

Legacy IT Systems Lose U.S. Lenders $407 Million Every Year, Reveals New Divido Research

Banking , Alternative Finance

Divido, the multinational white label platform for point-of-purchase lending, has today released the findings of its latest research, The Global Lending Report. The report provides insights and trends into the future of the global point-of-sale lending market. Divido surveyed senior decision-makers in the banking/lending space across seven different regions, including the U.S, U.K, Germany, France, Spain, Italy and the Nordics.

Point-of-sale finance is booming

Fuelled by consumer push-back on credit cards and a desire to have more flexibility when it comes to spending, the average U.S. lender estimates point-of-purchase finance will be worth almost $407 million to their individual business over the next 12 months. Digging deeper, 43% highlighted this space to be worth between $250 million and $10 billion to their business in the same time period. Additional figures report the market size for point-of-sale finance in the U.S. to total $361bn.

Alongside this, U.S. lenders are set to invest an average of $45 million each into their point-of-purchase IT infrastructure over the next year. That said, across the seven markets, investment into point-of-sale finance is a priority for lenders, with two-thirds planning to invest between $1-500 million in this space over the next 12 months.

The wounds from failed projects are still fresh

Lack of appetite for investment following previous failed legacy IT projects remains a major concern, with 54% of U.S. lenders ranking it as the biggest challenge when it comes to delivering payments technology. Alongside this, in the last 12 months, IT projects for lenders in the U.S. ran over budget on average by $11.7 million.

U.S. lenders are also feeling the impact of increased regulatory clampdown, with 49% highlighting compliance with regulation as another hurdle to overcome when delivering payments technology.  

“Banks are in a tough place. They’re facing competition from multiple directions but can be held back by increasingly expensive legacy systems that limit product development in-house,” said Christer Holloman, CEO and co-founder, Divido. “There is another option, banks can look to use third-party fintech companies to release the increasing pressure on internal legacy IT resources. By doing this, they can safely turn their attention to focus on more timely core business issues, such as defending market positioning, addressing regulatory changes and winning new deals.”

Concern around new fintech players

New entrants are a top concern for 75% of lenders. No lenders agreed that they are confident about their ability to compete with these new market entrants, with 32% highlighting the ease at which new entrants can integrate with other businesses’ IT infrastructures, as their biggest concern.

That said, global collaboration among lenders and fintechs is firmly on the rise, with two-thirds stating that would consider partnering with a third party platform provider to deliver services to consumers. Overall, only 3% of lenders felt fintechs were their competitors not their collaborators, paving the way for more partnerships to deliver better experiences to customers.

“This is decision time. Banks can double down on existing routes to deliver services such as point-of-purchase finance/loans, to the digital economy. Others can partner with fintechs,” continued Christer Holloman. “One way or another, banks will need to find ways to maintain and grow the lending relationship with the customer, or risk losing out to competitors and new entrants.”

Divido’s lending platform is quick to integrate with, works in multiple markets and with multiple lenders. It is currently available in the U.S, UK, Germany, France, Spain, Italy,  and the Nordics.

Divido is on track to process its first $1 billion worth of credit applications in 2019, as it realises its vision to become the world’s largest platform for point-of-purchase finance.

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