PDL in Poland

Microcredit companies in Poland have come a long way from organizations that lent money to almost everyone, to companies with high-tech loan analysis, ranking systems and artificial intelligence. What changes are expected in this area in the future?

The PDL market is actively growing worldwide. The rapid growth of this segment may be linked to the high demand for microfinance from the citizens. But in order to withstand competition with banks, microcredit institutions have to be as efficient as possible. To this end, companies are actively introducing new technologies, including algorithms for data analysis and processing.

Previously, this area was dominated by European countries that have been developing their banking services for a long period of time. Now, the rapid development of the Internet and the mobile technology market has led to the emergence of strong participants in less developed countries.

In Poland, this industry is now at its peak. For many years, the level of development and quality of PDL banking services in Poland has been lower than in the USA and other European countries. This was due to a long period of state monopolization and lack of competition. Today, this situation has changed fundamentally and these changes are for the better.

In Poland, at the beginning of the 2000s, PDLs had a rather negative image. This situation was partly the fault of the companies themselves: at the stage of the inception and initial development of the microcredit industry, a huge number of unscrupulous organizations worked on this market, which did not shy away from tough and unscrupulous actions on the part of collectors and such organizations themselves.

Clients often did not fully understand what they were doing when they signed the loan agreement, and the hidden terms were intentionally written in small print. At the same time, the new segment was slightly regulated by law. So it is not surprising that even now the PDL market often has a negative reputation in the eyes of citizens of the state.

In addition, we used to look at the microcredit sector through the prism of higher interest rates compared to the same loans in traditional banks, although the conditions they provide in Poland are also disadvantageous compared to those in Western Europe and the United States. So why, despite everything, the PDL services sector is developing rapidly not only in Poland but also in prosperous countries with a stable economy and financial system?

To begin with, rumors about excessively high PDL interest rates are too exaggerated. If we compare them with the terms of loans provided in Canada, Great Britain, and the United States, the rates are approximately at the same level. For example, in the United States, the average annual interest rate of payday loans is about 650%, a figure that is calmly counted. In Poland, the same rate is perceived as extortionate. But this attitude is mainly explained by the peculiarities of the mentality of the inhabitants.

The level of financial literacy among the population of Western Europe is much higher. What is the reason for that? To begin with, in both Western Europe and the United States, the population is the tax operator. People are accustomed to independently calculate their income and expenses and report to the state. In Poland, the process of tax calculating falls upon employers, who deduct them from an employee’s salary before it is paid.

While this seems convenient for employees, many do not realize their role in the formation of the state budget and therefore do not pay enough attention to the efficiency of this money spending.

On the other hand, some people in Poland are quite frivolous about their family or personal budget. Due to the low level of financial literacy, people often misuse PDL loans as well, turning them into long-term and highly unprofitable loans. It is therefore not surprising that a convenient financial instrument has acquired a negative connotation. However, the situation is gradually improving thanks to the activities of government regulators and among the clients of microcredit organizations, there are more and more of those who use PDL for its intended purpose.

Today, microcredit organizations position themselves as representatives of the fintech industry and widely use innovative methods of risk assessment and management, introduce modern technologies and artificial intelligence to process more data. Increasing importance is being given to the blockchain and a significant number of services in the near future will be organized in the format of a structured chain of blocks.

The introduction of such technologies and the Internalization of the PDL industry leads to the fact that this industry is becoming more developed and popular in Poland. One example is the information provided by the British IT platform named Hoffman-Graham. This company provides financing to microcredit organizations around the world, attracting funds from its users and then distributing the profits from transactions between them. And, as its statistics show, the geographical distribution of its users is shifting more and more towards Poland every month.

Now the organizations providing PDL services in Poland have practically nothing in common with those companies that initially worked in this market. Not so long ago, everyone could apply for a loan, an assessment of the probability of default on a loan was not made, and the conflict situations that arose in connection with this were resolved by psychological pressure or forceful methods. Now the situation has completely changed and the PDL industry in Poland is actively developing and evolving. And in the near future, they will be able to reach the level of the leading countries in the microcredit sphere.