Alternative finance includes a variety of non-banking lending channels such as peer to peer lending, crowdfunding, invoice trading, etc. Many startups and progressive businesses are delving into the sector to find out perennial growth opportunities. Additionally, large banks are utilizing their resources and huge customer base to extract the most out of the alternative lending market.
Establishment of new and advanced online lending platforms have been significantly helping the market in finding customers. In addition, technologies like big data, AI and ML have been a keen enabler of growth in alternative finance. Blockchain technology is also expected to accelerate the growth rate in the channels. The prime benefits of involving these technologies in alternative lending are:
- These technologies have a phenomenal impact on detecting frauds and anti-money laundering patterns making the platforms safer and secure.
- Bringing transparency and immutability to transactions between lenders and borrowers by storing them cryptographically on distributed digital ledgers.
- Making every step in the process of lending faster and secure.
- Eliminating manual intervention to avoid errors and bias to a great extent.
- Smoothening the process of lending to save a lot of time and investment.
The alternative finance industry has witnessed exceptional growth in recent years with P2P lending maintaining a strong position in the investment landscape. Businesses who are willing to offer alternative lending services to the customers, here are three things you need to know.
Transparency is the ‘Key’
The significance of trust and transparency in the banking and finance industry cannot be diminished. Platforms that focus more on process transparency for lenders and borrowers minimize potential social risk. Without transparency, investors cannot be fully aware of the risks and consequences of their invested money.
Better transparency ensures deeper customer relationships and produces more loyal, knowledgeable customer base. Transparency is also crucial for enhancing customer loyalty. In general terms, transparency can enhance the lending platform as a whole and help it to run more efficiently.
Alternative finance has grown significantly, and the number of players entering into the market has risen too, making ‘reputation’ for the platform more important than ever.
Increased number of entrants in the alternative finance market means investors and borrowers have a lot more options than before. Higher returns, lower risk, better transparency, enhanced flexibility, and more such benefits could supplement the reputation of the lending platform.
Demonstrating a track record of higher returns to investors, flexible loan process and solid relationships with borrowers could help business to gain a competitive advantage in terms of reputation.
Flexible credit facilities
One of the most crucial advantage that alternative lending platforms offer is greater flexibility than highly regulated banks. Offering fast and flexible services to customers at a low cost is the key to prosper in this highly competitive market.
Alternative finance channels generally provide greater flexibility in loan approvals and repayment of the loan depending on the credit score of the borrower. For instance, a borrower can repay the loan amount:
- In one go, i.e., repaying the whole amount before the decided loan tenure.
- Paying interest for a couple of months early, e.g., a borrower can pay interest in January for February and March if he wishes to.
The alternative finance market is no longer a startup and gaining huge interest due to the benefits it offers. More and more businesses are trying to leverage the potential that the industry has to offer. Akeo Lending helps them by providing a framework that gives businesses a pedestal to build customized P2P lending platform quickly. The framework comes with modular back-and-front-end architecture so that businesses can build platforms on top of it.