Lending Briefing: The 2021 credit market recovery and Klarna’s annual results
- After the pandemic caused lenders to be cautious, the credit markets have opened again in 2021, thanks to positive economic signs from borrowers.
- The earnings season has begun and Klarna posted its 2021 annual results. The BNPL player's mounting losses are a result of its strategy to invest in growth.

Credit markets are poised for growth
After taking a real blow during the pandemic, it seems like the stars have finally aligned for the digital lending market. Reports are showing a recovery in credit markets across 2021, and the industry is poised to continue growing this year as well.
There was a great deal of uncertainty at the start of the pandemic, and many lenders opted to take a wait and see approach. Origination volumes across personal, SMB and student-focused lenders were down 40% year-on-year in 2020, according to S&P Global data.
Credit cards and personal loans were some of the products that took the biggest hits in those early months of the pandemic – consumers just simply didn’t need as much credit, as spending decreased. Another impacting factor was the influx of government stimulus in the form of transfer payments or enhanced unemployment benefits.
Moreover, consumers turned to loan accommodation programs, and questions on how those consumers would perform once they exited those programs added to the uncertainty. As a result, lending to below prime consumers was suppressed and financial institutions turned their focus to the prime areas of the market to help mitigate risk.
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