The emergence of Fintech has driven the growth of newer lending business models that bring lenders and borrowers to be on the same platform to get connected without needing any middlemen. Alternative lending or P2P lending is one such sector that has managed to attract exponential audience worldwide.
Peer-to-peer lending or P2P lending lets individuals lend or borrow funds seamlessly without any long procedures compared to the traditional loan process. It offers numerous benefits over the conventional lending models with higher return rates and lower operating cost to name a few. With such benefits, P2P lending has become a popular option for investor and borrowers looking to get more from their money.
Here are some potential advantages of peer-to-peer lending.
Advantages of P2P lending
Higher returns – Peer-to-peer lending gives access to significantly higher returns for the investors than any other savings accounts or fixed deposits. According to reports, lenders investing in alternative lending platforms are earning gross returns from 18-26% per annum.
Lower interest rates – Banks charge high-interest rates from the consumers in case of personal and consumer loans. In some cases, the interest rates can go as high as 20% of the loan amount. On the other hand, p2p lending platforms let borrowers obtain easy loans at reasonable interest rates.
Feasibility – Although p2p lending is a heavily regulated business, it is free from long and cumbersome loan origination processes of conventional banks. Therefore, people can avail loans in a couple of days without indulging into many legal formalities.
Flexibility – Obtaining loan or investing funds on the p2p lending platform is comparatively easier than conventional banks. Moreover, investors can also withdraw their money from the platform at any given point of time. All this happens on a safe and secure platform which is free from government interventions.
Investment choice – P2p lending platform enables users to keep a check on how much and where the money is invested, unlike mutual funds. Lenders choose only to invest in the loans that they find suitable and profitable.
Naturally, there are some downsides of p2p lending platform too. Let’s us have a look at the flipside.
- Many borrowers are excluded from the platform as they don’t have a good credit score.
- Although investment returns to lenders are on the higher side, it requires proper study and analysis at the initial stage to yield such returns. Investments cannot always guarantee returns.
- That’s true that p2p platforms are gaining popularity all around the world, they are still a new concept for various countries which discourages people from investing.
Business opportunities with P2P lending
Over the last few years, alternative lending has proven to be remarkably beneficial for lenders and borrowers. The volume of global P2P lending market is exceeding, with per annum growth rates reaching 50% — 80% in various markets. Moreover, the emergence of technologies like blockchain and artificial intelligence have also facilitated businesses in the adoption of online marketplaces.
Peer-to-peer lending is here to stay and disrupt the traditional lending business. Given the rapid growth of alternative lending models, we can foresee exponential business opportunities with p2p lending in the finance industry.
To help businesses leverage the opportunities that online marketplace poses, we have created a customizable lending framework to build a P2P lending platform. It is a one of a kind framework that offers 360-degree lending solutions with a modular backend and frontend.
A well-regulated and secure peer-to-peer lending platform could offer vast revenue generation opportunities for the finance world. The fate of the P2P lending market will be determined by the customer base and how businesses around the world adopt it.