Financial institutions are using digital technology to mine the massive amount of data generated by consumers in order to minimize their risk when they give out loans. This of course is not an exact science, and there are always conditions that cannot be quantified no matter how good the algorithm determining the creditworthiness of the applicant is. But there is still an upsurge in the adoption of financial technology, or fintech, according to the new Juniper Research (News - Alert) report, which is expected to reach $10.5 billion globally by 2020, doubling from the $5.2 billion of 2016.

According to the report, the growth is going to be driven by an increase in peer to peer lending, crowdfunding replacing traditional lending mechanisms, and next generation analytics platforms. This will all come to play as businesses and individual consumers in developing countries are targeted for potential customers.

Lending and financing services in developing countries are dramatically different than those in developed nations that have systems for gauging risks. This includes bureaus that determine the credit worthiness of an applicant before financial institution approves a loan. For developing nations, banks and other lending institutions are using different criteria to overcome these challenges.

The Juniper Research report, titled “Fintech Futures: Market Disruption, Leading Innovators & Emerging Opportunities 2016-2021,” argues new methodologies have to be used to gauge the risk exposure of lenders, and believe it or not, social media use is one of those metrics. According to the report, an applicants' social media activity is going to be used as a deciding factor for a loan.

In developed countries, crowdfunding or peer to peer lending platforms is giving opportunities and more attractive alternatives to traditional investments. Juniper says record low interest rates is one of the reasons this segment is seeing growth.

Michael Larner, research author of the report, said, “Platform providers need to be transparent about how they assess firms and not just sell the tantalizing potential of funding the next Facebook (News - Alert). We are yet to witness a blockbuster exit for investors, but a successful IPO would cement crowdfunding's foothold in the marketplace.”

The Juniper report covers financial technology sectors, both from a B2C (business to consumer) and B2B (business to business) perspective with a global analysis by examining how fintech firms are challenging financial services sectors across different segments. The key segments analyzed in the report are: Banking & Payments, Lending & Financing, Wealth Management and Insurance.