All about Digital Lending Models: Driving factors and benefits

credit risk analyst course

Digital Lending business models have taken over the globe. These business models have increased the profitability of lending activities while making applying for loans easier for consumers. It has been estimated that the market size of the digital lending market will reach $12.1 billion by 2023. This is a huge CAGR (Compound Annual Growth Rate) of 18.7% as compared to 2018. Digital lending is faster, more efficient, and cuts down costs for both lenders and consumers.

Digital lending models also help financial firms expand exponentially without the need to physically be present in various cities. With new technologies to support digital lending, taking a loan has never been easier. Similarly, for companies, lending money has never been faster.

Onboarding new users have become easier due to this. Credit risk management courses and credit risk modeling courses also place a lot of importance on digital lending business models. Now, let us check what is a digital lending and why it is so popular in modern times.

What is Digital Lending?

Digital Lending is a method of disbursing loans through applications or other electronic mediums. Compared to traditional lending, digital lending is faster, efficient, and more convenient. Through automation and analytics, most of the pre-lending requirements are taken care of, thus, helping companies determine which users are eligible for loans.

This also helps decide upon the credit limit for users based on their credit history or payment history. With the incorporation of technologies such as blockchain and encrypted applications, digital lending applications or portals have never been safer.

Here are the 2 main types of Digital Lending Business Models for common consumers:

  • Third-Party Loan Market: This digital lending model is based on showcasing loans from various banks and financial institutions through a specific portal. Peer to Peer lending is also another variation of this business model. Peer to Peer model helps match borrowers and lenders through a common platform.

  • Lending Applications and Online Lending portals: This model is based on lending loans or credit through mobile apps or online portals directly to users. The Line of Credit model is another approach to this and many lenders are using this model for disbursing funds that are available as credit.

There are also 3 other digital lending business models for working with other businesses and organizations:

  • SME Lending: Digitally lending funds to small and medium-sized enterprises
  • Supply Chain Financing: Financing products or resources directly from wholesale sellers or marketplaces.
  • Invoice Financing: Providing working capital based on customer invoices that are unpaid. This helps in meeting liquidity requirements that are short-term.

Driving Factors of Digital Lending Models 

Here are the main driving factors for digital lending:

  • There are fewer regulations, rules, and compliance requirements.
  • Most consumers have access to the internet, this makes it easy for Fintech companies to reach out to their borrowers.
  • Millennials are huge fans of convenient methods. Since applying for loans online or digitally is faster and easier, they are more likely to use digital lending apps.


The key benefits of digital lending models are faster loans with quick disbursements and the need for minimal documentation. Having a credit history is also not a necessity for digital lending models and companies are open to lending funds to first-time borrowers as well. Especially for millennials, there is nothing better than digitally borrowing money.

Good Credit risk management courses and credit risk modeling courses  such as the Credit Risk and Underwriting Prodegree from Imarticus can help professionals understand more about analyzing the risk involved with digital and traditional lending models

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