| Peer-to-Peer Banking
picture of peer to peer lending a hand or p2p as some people call it

P2P Lending Software

Software for peer-to-peer lending.

Peer-to-peer lending platform.

Peer-to-peer lending is evolving fast. So are the business models. As an example, most early P2P investors bid on specific borrowers. But recently the model has evolved and often takes more of a pooled investment approach in order to mitigate risk. In either case, Portfolio Plus can manage your lending model. And there may be other variations that P2P lenders need in order to differentiate themselves. As they should. At SIT, we're ready to help. We have an open platform that can be accessed by virtually any user interface technology.

Automated credit decisioning.

Automated credit decisioning is a must-have for P2P lending. But be careful. Test the experience with some sample applicant data and adjust your criteria if necessary. Also, if you're looking to differentiate your target market, you may need to adjust your credit decisioning criteria. Are you willing to take a risk where others aren't—or vice versa?

P2P vs. marketplace?

In the early days of P2P lending, individual investors bid on borrowers' loans. That kind of investing still happens, but in recent years the larger institutions got interested, too. With larger institutions' money involved, it became harder to stick with the term "P2P lending," and Renaud Laplanche, CEO of Lending Club (NASDAQ: LC), suggested that the term "marketplace lending" may be more appropriate to describe the current market for these type of unsecured loans.

People lending to people.

The eBay-like P2P model works on a simple premise: people lending money to people.

Clients will request a loan through a P2P banking site, placing a loan proposal up for review by bidders. After a credit check is completed, the prospective borrower puts his or her loan up for bidding.

Bidders (ordinary people now acting as lenders) offer to finance the loan and set their own rate of interest for the borrower. More importantly, the loan can be for virtually any cause, ranging from debt consolidation to a business loan.

Once the loan target is reached by bidders, whether by one bidder or several, clients will take on a loan at an interest rate significantly lower than conventional banks. Monthly payments are then deducted automatically from the borrower's bank account, with the P2P site taking a fee from the transaction.

P2P lending model

SIT's underlying architecture can support your online P2P lending model, allowing borrowers to request any type of loan. With the right user interface, your investors can post their own interest rates and bid on any number of loan requests and investment opportunities.

Diagram depicting basic P2P lending model on a P2P lending software website.

New lending advantages.

With peer-to-peer lending, borrowers and lenders gain advantages. Borrowers get a less expensive loan rate, while lenders get a higher rate of interest than they would on savings accounts.

What about risk?

Like traditional banks, credit checks are performed on potential borrowers and this credit rating is made available to lenders. The eBay-like P2P lending model encourages lenders to spread their risk over many loans. As an example, a lender may invest $50 in 100 loans for a total of $5,000 to be loaned out.

Questions?   We have answers.

Contact us.

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This page was created or refreshed on July 11, 2018 @ 09:02:48
by Strategic Information Technology (SIT) Ltd., Stouffville, Ontario, Canada
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