Launching a P2P lending business: Software under the hood

peer-to-peer lending

Peer-to-peer (P2P) lending is a growing trend in the business world.

Rapid advances in technology have made it more possible now than ever before to access financing for business outside traditional brick and mortar institutions.

But how do such solutions work? And what should you know before diving head-first into the world of P2P lending? Here we’ll take a closer look at the industry and the peer to peer loan software driving the revolution.

A growing market

It’s estimated that by 2025 the P2P lending market value is set to reach one trillion USD. This is a rise on its 2015 value of 64 billion USD. Considering the concept of P2P lending, as we know it, has only existed since 2005, this is an impressive growth dynamic. But why is peer-to-peer lending so popular?

Lenders receive higher returns – with interest rates on bank-based savings accounts still low, P2P lending is purported to be a reliable tool for achieving a decent return on investment. The exact amount varies between companies, but this can be anything from 4% to 26% per annum or even more.

Offers an alternative to traditional investments – knowing how to invest money and where is said to be the key to financial success. However, the stock markets and ISAs aren’t for everyone. P2P lending provides a tempting alternative for investors.

Lower default rates – according to studies, the default rates on P2P lending could be as low as 2-3%, making it one of the lower-risk investments out there for investors.

Flexibility in terms and conditions – banks often come with fixed-term accounts meaning money is trapped for a specific period. P2P lending platforms usually don’t have such strict requirements on when finances can be withdrawn.

Possibility to choose when and what to invest in – investors can view, at all times, where their money is and who it’s benefiting. This means taking control of finances and controlling money is more transparent and manageable than ever before.

Essentially, P2P lending is breaking down traditional barriers between lenders and borrowers, making investing both more personal and accessible for all parties.

Technologies that drive P2P lending

However, no industry is without its risks. For a business seeking to get on board with one of the biggest fintech trends today, it’s vital to engage the right technology from the beginning. P2P lending software allows peer-to-peer lending companies to allocate funds, risk assess loans, and develop smart lending partnerships with higher efficiency and security levels.

In its essence, P2P loan software is any technology or platform that supports P2P lending. P2P lending software can help businesses in:

Matching lenders to borrowers

Creating a deeper relationship between borrowers and lenders personalizes the investment process. Smart technology aids both borrowers and lenders find the right partner for their investment, meaning greater comfort for both parties involved in the investment.

Assessing risk

All investment is a risk from the relatively secure world of deposit accounts to the riskier world of trading and everything in between. P2P loan software allows users to assess the risk of any investment made.

Automating processes

Finding the right investment opportunity can be a time-consuming process. Peer-to-peer lending software uses technology to highlight lending opportunities. In addition, many functions can be automated, including risk assessment, paperwork, and more.

Flexibility in lending

Investing in a company today doesn’t have to mean buying stocks in a multinational giant. Instead, P2P lending allows users to invest in a variety of businesses and has the potential to support up-and-coming companies that may not be eligible for traditional investment.

Integrating systems

Whether as a standalone lending platform or part of a broader business, P2P lending software can be adapted to suit business needs. This makes it a flexible solution for traditional lending businesses seeking to brand out newcomers to the market.

Going custom or choosing out-of-the-box software

Not all P2P lending software is equal. When engaging this technology, there are various options available, depending on the project’s business need and scope. So how do you know whether to go custom or choose an out-of-the-box solution for your P2P lending software?

Out-of-the-box solutions are fast and practical peer-to-peer loan software toolkit. Usually, these solutions are applied when you need an immediate to-market product that is efficient and doesn’t require a lot of customization. Out-of-the-box P2P loan software solutions are great for straightforward projects, but if your platform is complex, deals with a niche area, or something else beyond the standard, then it might be time to look at custom technologies.

Custom peer-to-peer loan software is a customizable solution to P2P lending. When developing a P2P solution, companies may choose to customize their tools to be tailored to their business needs, for example, to cater to a niche in the market, such as start-ups or charity projects, non-traditional businesses, or other, where non-standard analytics apply. Custom P2P loan software provides the possibility of getting a platform 100% tailored to your business needs and legal environment. While this type of software may take a little longer to tailor and get to market, it offers unparalleled capabilities in terms of compatibility and accuracy.

Benefits and opportunities HES P2P lending software

HES FinTech is a financial technology services provider. With almost ten years of market experience under their belt, the company develops custom P2P lending software to meet market demand. Aside from the trust, they cultivated with previous projects, here are some of the reasons that make HES FinTech stand out as a provider:

Customization – from the minimal viable product (MVP) to a complex solution, HES FinTech develops software to meet all complexity levels. Whether the platform is pooled or direct, created via a mobile app or web, and no matter the industry or specificity, technologies are available to meet all requirements.

Risk assessment – knowing the risk and taking a calculated investment is at the heart of lending. Integrating risk assessment tools into P2P lending software means having the right kit under the hood when it’s needed. Risk assessments can be undertaken in the app, streamlining the lending process.

Automation – with a 60% reduction in operating costs, coupled with flexibility and robustness, HES FinTech offers a diverse range of solutions to suit almost any P2P lending provider.

What does the future hold for the P2P industry and lending software?

With no signs of slowing down, it’s clear that the P2P industry is one to watch. Growth in technology trends such as AI and ML, alongside greater software access, means P2P lending is becoming more accessible, and more importantly, smarter than ever.

Coupled with a growing societal desire to create change and an increased focus on SMEs, in the coming years, we are set to see rapid advancements not only in the adaption of P2P lending itself but also in the peer-to-peer loan software that supports it. That means putting technology in first place in a P2P business is always, always a must.