P2P Lending: What’s Up and Next for the Segment?
New, digital lending options have long rendered traditional bank loans cumbersome. In the diversity of virtual options, peer-to-peer (P2P) lending won a reputation for being one of the most borrower-friendly loan types. Learn why.
In this article, you’ll find P2P lending explained, its main benefits, examples of the best companies in the industry, and what it takes to succeed in the P2P lending market.
P2P lending evolution
Peer-to-peer lending (P2P) has reshaped the financial landscape since the first online P2P lending platform, Zopa, emerged in 2005. These platforms, also known as crowdlending, serve as alternatives to traditional financial institutions by directly connecting borrowers and lenders.
The model gained momentum after the 2008 Great Recession, fostering a worldwide boom in P2P lending companies.
How crowdlending is changing finance
Opting for P2P loans over traditional bank loans offers accessibility to a broader applicant pool, making them particularly advantageous for startups. Competitive interest rates and direct interaction with lenders enhance the market positioning of these platforms, streamlining the lending process for both parties.
P2P lending changed the game on both sides of the pitch. Investors deposit funds on P2P platforms, where the system matches them with potential borrowers. On the borrower's side, creating a profile with essential financial information determines their risk category and corresponding interest rates, presenting them with compatible investors.
How to succeed in the P2P lending arena
If you are curious about venturing into P2P lending, you should know what takes a business to the top in this realm. The key ingredients are understanding your customer, a state-of-the-art system, a reliable tech stack, strict adherence to the relevant regulations, seamless integrations, and a skilled team. These factors contribute to the success of a P2P platform and are crucial in the rapidly evolving FinTech landscape.
Top companies in P2P lending
Almost every country across the globe is now home to P2P lending businesses. Industry leaders include companies like goPeer in Canada, Happy Money in the USA, and Funding Circle UK. Each of these companies excels in its national market, offering unique features and competitive rates that readers can explore further in this article.
What's the future of P2P lending?
Allied Market Research predicts the global P2P lending market to cross $550 billion by 2027. With regulators developing clearer yet stricter regulations for FinTech, P2P lending will not be an exception to these rules. So, as customers get more and more simplified access to loans, building credit on literally everything, P2P lending providers will need to adapt to a more scrutinizing oversight.
As embedded finance progresses at a frenetic pace, P2P lending platforms may also add other financial products to their suite, likely linked to insurance, wealth management, and investment.
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