Online loans in Switzerland – Development and Outlook
by Christoph M. Mueller*
The world is going (increasingly) digital. A major trend of our time is undoubtedly the ever-present call for digitalization. Why is this? We are hoping for an enormous increase in efficiency, independence from time, space constraints and “non-stop access” to (almost) everything.
Everything has to be available from everywhere all the time and, thanks to digitalization, to every section of the population.
Everything – always and at any time
An online loan is therefore a kind of symbiosis between digital (=always and at any time) and money which is not used and temporarily available for investment. This creates a kind of double enrichment for the consumer.
This is not good news from the perspective of conservative investors because when they make their money available to a third party a dilemma arises with respect to pricing. Currently – in a negative interest rate environment – investors get almost nothing for their money and there is therefore little incentive to temporarily provide money to someone else.
Incentive for investors and market consolidation
In the current environment it is of course important that lenders’ activities make sense to them since interest alone provides (almost) no incentive. Online loans create a very high degree of transparency and the low production costs associated with online loans reduces the yield for investors less than in the case of traditional banks, for example.
It is therefore understandable that the digital loan market in Switzerland continues to grow more and more and is attracting an increasing number of players.
A certain number of providers is certainly beneficial to competition although there is a limit after which further market segmentation no longer makes sense, even with the advantages of digitalization. A consolidation of the market with regard to the number of providers will therefore certainly take place once the Fintech hype slows down and digital lending platforms become normal business concepts which have to operate profitably.
The sky is no limit
Independently of a consolidation, the loan market in Switzerland, which is very large compared to other countries, will be further digitalized. Growth will be large and rapid and will provide direct lending providers like CreditGate24 with a greater share of the market.
*Christoph M. Mueller is the founder and CEO of CreditGate24