Nine out of 10 banks, building societies and peer-to-peer lenders, believe the UK lending market is in a price war, according to software provider Target Group.
Last summer, the firm surveyed 100 senior finance professionals across the UK, finding more than one third of the industry believe a flood of new entrants into the market in recent years has created greater competition and driven down prices.
Nearly half the lenders questioned also reckon challengers have sparked greater product innovation.
Its report explained that big banks are most reliant on technology when it comes to making underwriting decisions.
Nearly all of the established banks that responded regard big data as important or very important to loan decisions, compared to three-quarters of building societies and P2P lenders.
Banks also ranked highest when rating the importance of technology for customer engagement. Nearly two thirds regarded it as very important, compared with only 9 per cent of building societies and 4 per cent of P2P lenders.
Ian Larkin, co-group chief executive at Target, explained the arrival of new specialist lenders created an impetus for change when it comes to product design, customer engagement, underwriting and technology.
“This in turn has sparked price pressure that has not been slowed by [Bank of England governor] Mark Carney’s recent guidance on UK interest rates.”
He continued while the vast majority of traditional lenders say that technology is important when it comes to customer engagement, many face a challenge in adapting their legacy systems.
“On the other hand, new entrants have the advantage of having no legacy, creating technology platforms with greater flexibility and agility.
“However, these players do not have access to the same degree of historical customer data, a valuable tool to provide insight into customer behaviour and credit risk.”
