Mortgages, Cards to Lead Online Lending

Consumers will obtain 8.9 million loans and credit cards over the Internet by 2003, representing more than $167 billion in receivables, according to a report by Forrester Research’.

Forrester’s “Credit at the Threshold” report found that, fueled by the current refinancing boom and the offer of competitive rate information, online mortgages will capture almost 10 percent of the total market by 2003. On the credit-card front, Forrester predicts that every credit card issuer will be using the Web as a customer acquisition channel by the end of 1999.

In five years, Forrester reports, one out of every six credit cards issued will be obtained online and Net-sourced credit card lines will approach $22 billion. Other credit products, such as auto financing, home equity loans, and student loans will also benefit from this emergence and continue to mature.

“The ability to comparison shop for features and prices makes the Internet a natural channel for credit products,” said Forrester analyst James P. Punishill. “With 38.8 million households expected to be online by the end of 1999, the availability of credit over the Internet has the potential to fundamentally change the market dynamics for these products.”

The easy availability of credit information on the Internet will give consumers greater control over their sources of financing, Forrester found. By homogenizing rates and terms from many credit providers, multivendor marketplaces will make it easier for consumers to compare products and quotes.

“Just like online investing a few years ago, consumers are going to embrace credit products on the Internet,” Punishill said. “Once borrowers get comfortable online — and lenders get smart about their prospects — complementary credit products will be marketed and sold with great success over the Net.”

For the report, Forrester interviewed more than 50 lending institutions including banks, credit unions, and consumer finance companies. More than 80 percent of the lending institutions interviewed indicated that they will offer online credit applications by early next year and more than 60 percent will approve or deny applications online before the end of 1999.

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