Digital revolution changes credit industry: faster, smarter, riskier

2035 will be the time of "one click away": everything can be done anywhere and instantly, interactively and digitally. Lenders will work toward this as much as possible; the lending process will continue to be digitized and become more personalized and interactive. Lenders are gathering more data and making smarter data analyses, increasingly with artificial intelligence (AI). AI can be deployed across almost the entire lending chain. Opportunities are also growing for lenders to access data sources from other organizations; this is because of open finance legislative initiatives in the EU. This allows lenders to more accurately classify consumers into very specific target groups. And chain parties increasingly have more and different types of data to accurately, granularly and quickly determine consumers' creditworthiness, and thus increasingly personalize credit offers. The development of AI may also play an increasing role in customer contact. Initially to support the advisor. But possibly AI can start helping the customer navigate the customer journey independently, via an online mortgage portal, for example. The advisor is then on standby if the customer needs help.

Opportunities, but also risks

For consumers, further digitalization will lower barriers and increase convenience. This produces positive effects, such as early detection of payment problems and low-threshold payment solutions. But also negative effects, such as debt habituation, possible exclusion of customers through finer-grained data analyses and privacy issues. Based on the principle 'putting customers' interests first', the AFM puts the importance of adequate risk management first. At the same time, AFM remains mindful of the opportunities of digitization to improve the quality of and access to financial services for consumers. This calls for a balance between giving scope for exploiting these opportunities and mitigating potential risks. Against this background, the AFM will pay explicit attention in the coming years to a number of issues that have emerged from this exploration.

Issues for supervision and industry

A first issue is about instant credit. Because being able to secure credit quickly can lead to a gradual cultural shift from "credit is the exception" to "credit is the norm. A second issue is how to protect consumers from risks of exclusion from credit without sacrificing opportunities for greater accessibility. A third issue is about the risks of personalization of credit offerings. This can lead to risks of bifurcation and unequal treatment among consumers. A fourth issue concerns the oversight of an increasingly complex and interconnected ecosystem around lending. And finally, a number of technological trends also require thinking about how they relate to existing laws and regulations on behavioral surveillance and privacy.

Call to industry and stakeholders

AFM calls on the industry, as well as other relevant regulators, regulators and policymakers, to consider, from their role and responsibility, the possible future perspective outlined in this exploration and the issues mentioned. The AFM is happy to engage in further dialogue on these issues in the coming period.