Thirty percent of mortgages and 40% of auto loan originations will come from the Internet by 2005, according to a new study by Killen & Associates.
The study, entitled “Loans Over the Internet: New Opportunities and Threats,” states that a major shift from the paper-intensive loan business–99% of today’s transactions–to Internet-based services is under way.
Major changes for borrowers and dislocations for lenders who have traditionally relied on face-to-face, people-, and paper-intensive processes are expected. Current market leaders must move quickly to offer their own Internet services to protect market share and profitability, the study says.
“The ease of Internet access will be a boon for all borrowers and lenders, including mortgage and auto financing companies,” said Michael Killen, president of Palo Alto, CA-based Killen & Associates.
“Consumer and commercial lenders worldwide, including Bank of America, Countrywide, Advanta, and Auto-By-Tel are expanding their use of the Internet and other electronic networks to sell loans to consumers and commercial customers.”
“Historic market leaders–and brand loyalties–will be challenged,” Killen continued. “All loan originators are affected by the development of Internet access to financing, including Chase Manhattan, NationsBank, and others in the residential loan and vehicle financing marketplaces.
“Captive credit companies, including Chrysler Credit, Ford Credit, and GMC,
and automotive finance specialists, such as Capital One, Advanta, and MBNA,
will also be affected. They need to protect their business bases by providing
superior value to consumers. Firms that fail to adapt their loan services to
the Internet are especially vulnerable to loss of market share.”
The study includes 5-year forecasts of the growth of home loans and
auto financing over the Internet; market perspectives on the development and
deployment of secure business and payment protocols, such as SET, OBI, OFX,
INTEGRION, and OTP; market strategy recommendations for both new vendors
and established players looking to protect and grow their market presence;
and joint venture and partnership recommendations for loan delivery
applications through new
delivery channels.
Additional details are available at the company’s Web site.
Killen & Associates is a market research and consulting firm whose studies,
seminars, and television programming enable clients in the telecommunications,
banking/financial services, and information technology industries to identify
business opportunities created by technology advances, public policy changes,
and market forces.
