Finance and technology are progressively overlapping in various existing approaches. One of the most significant trends in latest years has been Peer-to-peer lending. Generally, Bank is the only place for individuals and entrepreneurs to apply for loans. But individuals who face specific issues like no collateral, poor credit history, and avoid interest rates opt for peer-to-peer lending – borrowing money.
P2P lending is a method of lending money to entrepreneurs or individuals through online lending platforms. Peer-to-peer lending platforms connect the lenders and borrowers without any mediators. This has improved the lending process and become a more favorable funding method for businesses and individuals.
The P2P Market Outlook
The global peer-to-peer lending marketplace is expected to witness fundamental growth before the year 2024. According to the reports, the market would achieve a CAGR of 48.5% by the end of 2024. The report also presents that the volume of P2P payments is eclipsing yearly, with annual enlargement in P2P lending volumes in different markets during yesteryears.
P2P lending marketplaces’ rapid development fueled efficient technologies to make secure transactions, get competitive returns, and increase communities. These pioneering factors of P2P lending make a difference in the financial services industry.
Today the loans are taking place without face-to-face interaction. The use of technology expedites the payment process faster compared to banks. The market will get profitable opportunities with the rising number of loan applications on P2P lending platforms in the coming years.
An Alternative for Borrowers and Lenders
P2P lending is the fastest growing crowdfunding sector. Let’s consider the US; In the current situation, the unemployment rate is low. Individuals are merging debts and upgrading their financial balances while investors are keen on providing cash every month.
Individuals prefer online P2P platforms for borrowing and lending while banks are loaning less. Considering the traditional alternatives is a more comfortable and quicker way for borrowers and lenders to do financial transactions. It offers higher returns for lenders and lower rates for borrowers.
Consumer loans are the most available loans in online peer-to-peer platforms. The demand for small-medium business loans is considerably exposing new business opportunities for new market players. Thus the online lending platform is becoming the most engaging alternative for borrowers and lenders.
The Challenges and Solutions of P2P Lending Marketplaces
Online marketplace lending is booming. Despite the fact that the sector is interested globally, there is no authoritative value for the online lending marketplace industry. Even if it looks so promising, there are many components to be addressed:
P2P lending offers personal unsecured loans to small-medium businesses and individuals – It also gave way to fraudulent activities. Now it’s the most challenging problem faces by the online lending marketplaces.
When the repayment of the loan amount becomes late, it turns into bad debts. Most of the time, repayment default happens with borrowers. Fraudulent activities result in the loss of trust and confidence of lenders.
The first and biggest challenge is to find the right idea to solve a real problem. To battle this challenge, you must validate your idea carefully, build an MVP and launch instantly.
The second is to start a p2p business with a narrow focus. A broad focus doesn’t lead to failure, and it helps to find the right niche to focus on. But focusing on multiple verticals with a single solution may prevent you from finding traction. The better idea is to start with one niche and change if it doesn’t work.
The third is to find a peer-to-peer business model that scales. The p2p marketplaces struggle to find the right business model for the plans. The better option is to kick-start a sustainable local business and to grow the marketplace from there.
Rising Growth Opportunities
The unavoidable fact of unsecured loans is, P2P lending platforms face challenges such as repayment defaults, frauds, bad debts. The growth prospects are strong by factors like growth in interest rates, bank competition, and consumer market size. These significant challenges initiate P2P lending platforms that can beat market failures with ample opportunities for lenders and borrowers as an alternative method.
Generally, borrowers and investors are linked via online platforms. This lending process involves online transactions, thus allowing the investor and the borrower to transact using the exclusive online platform.
You can also learn more about the advantages of peer-to-peer lending business, which is becoming increasingly popular. Understand the risks and benefits if you are looking for investment opportunities.
Popular P2P Lending Platforms
Some of the well-known P2P sites include
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