Lending in Transition: The Defining Trends for 2026 and Beyond

By Vani Vangala, Product Business Manager, Infosys Finacle

Why business model reinvention, AI-at-scale, responsible growth, and asset tokenization will redraw the credit map, and how incumbents can lead.

Lending remains one of Banking’s few true profit engines, and one of its most scrutinized. In 2026, three forces are converging - journeys moving into third-party workflows, policy and data rights becoming more formalized, and decision cycles collapsing from days to moments. The result is a new mandate: redesign lending as a capability that can travel across ecosystems without diluting risk standards.

Today, the lending game is no longer won by branch reach or balance sheet heft. It’s won at the customer moment - where data is freshest, journeys are embedded, and decisions are auditable in real time. As lending migrates into platforms and enterprise workflows, winners will pair bank-grade orchestration with a product factory that turns policy into code: modular terms, real-time pricing, and versioned, auditable variants that partners can deploy safely at digital speed.

Regulation is reinforcing this shift. Regulators worldwide are accelerating consent-led data portability, making it easier for lending to move beyond the bank’s own channels. The U.S. has finalized a Personal Financial Data Rights rule that hard-codes consumer-authorized sharing and standardized APIs, with other markets like UK, Australia, Brazil, Singapore, etc. on a similar trajectory. At the same time, embedded finance is rapidly redrawing distribution economics, shifting borrower relationships closer to the point of need and raising the stakes for banks to deliver lending as a modular, ecosystem-ready capability.

With this backdrop, four shifts are defining winners in 2026 and beyond.

1) New business models: Competing where credit is consumed

Credit is getting embedded inside software and commerce platforms that control workflow and data - ERPs, marketplaces, payment processors, logistics networks - moving origination to the point of need. In practice, this shift shows up through a mix of operating models: BaaS-style capability provision, marketplace distribution, and co-lending [AK1] / risk-participation structures that let banks extend reach without carrying the full distribution burden. Banks that participate as regulated risk stewards in these ecosystems can scale efficiently; those that don’t risk ceding economics and relevance to distributors.

• Embedded finance is gaining traction. Leading brands are packaging working capital, BNPL, and merchant cash advances natively in their journeys. McKinsey flags the opportunity, but also the risk of commoditization if banks relinquish the end relationship to platforms.
• Digital‑only banks are maturing. In the euro area alone, 60 digital‑only banks were identified by end‑2024, with market share rising from 3.1% (2019) to 3.9% (2024), evidence that low‑cost, API‑first models are gaining ground.

What it means: The battleground is orchestration - coordinating data ingestion, underwriting, product rules, documentation, fraud checks, disbursement, servicing, and collections across third parties with consistent controls and audit trails. Banks that institutionalize policy‑as‑code and closed‑loop learning from outcomes will scale faster with fewer control surprises.

2) Technology‑unlocked opportunities: AI decisioning and hyper‑automation end‑to‑end

Generative and agentic AI are shifting credit from periodic assessment to always‑on risk. In McKinsey’s 2025 study with IACPM,roughly half of senior leaders identified gen‑AI in credit as a priority, with early‑warning, credit memo drafting, and pricing among top use cases - now transitioning from pilots to measured scale under tighter model risk controls.

Beyond decisioning, hyper‑automation across the loan lifecycle is compressing cycle times and operating cost. Case studies show material gains - double‑digit faster processing and leaner ops - when banks unify intake, verification, document intelligence, and exception management on low‑code/AI platforms. Industry analyses echo similar productivity lifts as AI streamlines complex loan administration and improves user experience with data‑mesh and conversational interfaces.

What it means: Success demands a defensible, auditable AI underwriting stack - explainability, bias testing, lineage, model governance, human checkpoints, and orchestrated automation from origination to collections. The winners will price more precisely, detect deterioration earlier, and steer portfolios without weakening governance.

3) Responsible lending at scale: Sustainability‑linked, inclusive, and supply‑chain native

Regulated markets are rewarding responsible credit like sustainability‑linked loans (SLLs), green/social loans, and structures that support underserved communities and SMEs in value chains. Global sustainable loan issuance rebounded in 2024 to roughly US$638B, including US$463B of SLLs and US$162B of green loans, even as penetration varied by region. Broader GSS+ debt momentum remained strong into 1H‑2025, signaling resilient demand for sustainability‑themed instruments.

At the same time, responsible growth is increasingly being executed through supply chains, not stand-alone products. Working capital finance (payables/receivables/inventory-backed) is becoming a growth engine as supply chains digitize, enabling banks to trigger, resize, and secure credit against verified transaction events inside platforms. In these anchored models, the same digital rails that reduce fraud and improve verification can also extend financing to smaller suppliers, and, where data is available, tie pricing and covenants to measurable supplier performance and transition metrics.[AK2]

What it means: Responsible lending isn’t a sidecar anymore; it’s core portfolio strategy. Sustainability‑linked and supply‑chain‑native credit can expand addressable markets, reduce loss volatility, and meet regulatory/issuer expectations, all while funding the real economy.

4) Emerging frontier: Tokenized collateral and the “Finternet”

Tokenization is moving from white papers to real capital markets plumbing. The BIS has articulated a unified ledger blueprint that combines central bank money, tokenized deposits, and tokenized assets on programmable rails, enabling atomic settlement and machine‑actionable collateral. The Finternet vision, championed by leaders across policy and industry, foresees tokenized, compliant assets flowing across unified, programmable ledgers, with early pilots expected to surface over the mid‑term.

In the U.S., tokenization is already touching structured finance for example, J.P. Morgan’s Tokenized Collateral Network (TCN) has facilitated near‑instant transfers of tokenized money‑market fund shares as derivatives collateral, with plans to expand into other asset classes, evidence of practical, regulated tokenized collateral flows at scale.

What it means: Banks don’t need to bet on a single tokenization model, but they do need readiness for programmable working‑capital and collateral patterns: event‑driven posting, clean collateral lineage, duplicate‑financing controls, and integration into risk and treasury.

The bottom line

In 2026, the advantage will not come from one more product or one more channel. It will come from the ability to originate and manage credit across fragmented journeys while holding a single standard for risk, fairness, documentation, and accountability.

This is where many incumbents will misstep. They will pursue growth through new routes to market without upgrading the control architecture beneath them, or they will over-rotate to caution and watch economics migrate to those who can execute with discipline. The winning posture is neither defensive nor experimental. It is deliberate industrialization: a set of repeatable credit capabilities (data intake, decisioning, pricing, contracting, servicing, remediation) engineered once, governed tightly, and deployed everywhere the customer chooses to borrow.

The CEO agenda is therefore clear: make a handful of irreversible choices early, fund the enabling spine, and demand measurable progress on cycle time, control evidence, and portfolio outcomes. Banks that do this will set the standards.

References

• Infosys Finacle, Lending Trends for 2026 and Beyond
• Research & Markets, Embedded Finance Market – Forecasts 2025–2030 (market size trajectory) [researchan...arkets.com]
• CFPB, Personal Financial Data Rights—Final Rule (open banking; compliance timelines) [consumerfinance.gov]
• McKinsey & IACPM, Banking on Gen AI in the Credit Business (AI adoption priorities) [mckinsey.com]
• BIS, Blueprint for the Future Monetary System (unified ledger/tokenization) [bis.org]
• Ledger Insights / PIIE, Finternet (vision and roadmap) [ledgerinsights.com], [piie.cBabu@22babyom]
• J.P. Morgan / The TRADE, Tokenized Collateral Network live transactions (tokenized MMF collateral) [jpmorgan.com], [thetradenews.com]
• Natixis GSH, Sustainable Debt 2024–2025 Outlook; Climate Bonds Initiative, Global State of the Market H1 2025 (responsible lending momentum) [gsh.cib.natixis.com], [climatebonds.net]
• ECB, Digital banks in the euro area (scale of digital‑only models) [ecb.europa.eu]