âBanking is necessary, not banks,â stated Bill Gates. Lenders and borrowers may transfer money directly through the internet, bypassing banks and other financial intermediaries. This post will discuss the technical aspects of P2P solutions, including the required modules and rules for creating your own.
1. WHAT IS P2P LENDING?
P2P lending is a kind of internet lending where an investor directly lends money to a borrower. Individuals or corporations may lend to one another under this paradigm. Online platforms enable lenders and borrowers to meet and negotiate mutually advantageous arrangements. Potential lenders and borrowers sign up on P2P media to negotiate loan conditions, including debt and payback obligations. More loan options if you go to BridgePayday.
In 2005, the UK saw the first P2P middleman firm. Zopa has supplied over â¬278 million in loans and has a half-million UK customers.
P2P systems have been active in the US since 2006. Prosper and Lending Club, the most prominent American platforms, have issued over $5.5 billion in loans and risen by 84%. The sector is expected to reach $150 billion by 2025. Kabbage, OnDeck, and Funding Circle are major P2P SMB lenders. Kabbage received $135 million in early funding in December 2014, and OnDeck $1.8 billion in 2014. Funding Circle has raised $150 million from investors at a $1 billion value.
2. US P2P LENDING REGULATIONS
The SEC regulates investment, whereas the CFPB and FTC regulate borrowing. Several vital regulatory problems must be highlighted:
- The SEC prohibits P2P platforms from crediting direct borrowers’ loans. American P2P lending systems can’t operate as excellent matching platforms since they require a bank to give a loan to the borrower. The platform then issues debt security to the lender, who becomes a creditor.
- The newcomers have their own rules. They must first get a state license, which may be time-consuming, and register with the SEC. They must follow stringent reporting processes. It needs a lot of labor from the platform, subject to strict reporting standards.
- As licensed lenders, lending platforms must follow loan regulations, justify credit denials, and prevent unjust debt collection practices.
- Authenticators, credentials, and assertions are used in a digital system risk-based process to determine assurance levels. NIST SP 800-63 explains how to authenticate to a CSP to access a digital service or collection of digital services reliably.
Prosper and Lending Club are the market leaders. The registration process at both the federal and state levels typically complicates the introduction of new platforms. Due to the complexity of the business structures, only a tiny fraction of P2P lending goes to US enterprises.
Creating a P2P lending platform requires adhering to all regulatory requirements. We suggest hiring a lawyer, collaborating with bankers, and drafting a complete loan arrangement.
3. P2P LENDING PLATFORM DESIGN
The lending platform should be dependable, helpful, and vital to expand the audience’s reach. Building such a platform might be complex, but it can be done successfully. So, here are the steps to create a P2P lending platform:
Step 1: Register your company
The company registration form ensures a platform’s responsibility and protection. This depends on the registration criteria. Still, an LLC may pay taxes like a corporation. Large firms must share gains and losses.
Step 2: Pick a platform name and register it.
Consider the country’s user evaluations or the company’s state when picking the platform’s trademark. Check the US Patent and Trademark Office website before deciding on the last name. The selected title shouldn’t be the same as the domain name and might include a brief description of the company’s operations.
The platform’s URL should be clean and concise. To get a free name, you must pay a fee based on the domain zone ($20 to $100).
Step 3: Hire a team or use white-label Peer – to – peer software.
You may construct your platform or start with a white-label P2P lending software solution if you utilize ready-made open-source software to study which one is most suited for producing unique credit goods and reading user feedback. In terms of time, it depends on your budget and the number of features you want to incorporate. Full-cycle development takes 5-12 months.
Another alternative is to develop the product from scratch. Here are some key points to remember:
- Be driven and focused on long-term collaboration.
- The team should include fintech professionals, lawyers, bankers, marketers, and credit experts.
- Ensure that all experts and processes are ready.
- Teamwork should be efficient.
- The collaboration should be simple to coordinate.
Step 4: Create a web portal
The P2P lending website should integrate as many payment methods as feasible. It should have a straightforward UI and several language choices. Be creative and think of something outstanding for a unique and distinctive product.
Step 5: Product testing
Testing the website is an important step. Security of the platform, personal data, and payment gateway encryption should be tested. The user should be able to register and apply for a loan with one click. The team must also evaluate the platform’s performance on various devices and utilize techniques to improve it slowly.
Step 6: Product Launch
The marketing team will oversee the campaign, seeking new users, investors, and borrowers and proposing interest rates and lending options. It’s vital to be cautious and utilize user identification algorithms since this lucrative sector draws fraudsters and hackers.
Step 7: Ensure platform technical support.
Even after hundreds of tests and debugging, something may still go wrong. That’s when you need a quick response from a support staff ready to fix any issues. The rapid support staff will help you find and fix problems and understand what needs to be improved in the platform’s development.
Aside from the initial investment, you’ll need to fund the website specialists and marketing. The P2P platform costs between $15 andâ300 thousand. Popular ways to collect money include:
- Use the Security Token Offering (STO) – an initial token offer that involves SEC registration and a crowd sale. This option allows you to generate profit and reduce commissions.
- Bring a business strategy to prospective investors and shareholders to attract venture money.
Accept a bank loan.
4. P2P LENDING REQUIREMENTS
Online lending services link borrowers and investors to complete loans. P2P lending platforms let borrowers and investors negotiate interest rates and loan terms. It should support ISA/IFISA and secondary markets.
Standard P2P lending modules and microservices include:
- Protection against biometric hacking with 3D/2D Liveness Detection. Fake pictures, 3D/2D masks, or images on a gadget’s screen are detected by algorithms.
- Video Stream Liveness Detection assesses a person’s realism while video contacting a boss.
- Document recognition in photos (determining the document and comparing it to the client’s picture)
- We receive papers by scanning and recognizing essential ID passports and other client data.
- Bank ID to authenticate consumers for online administrative and other services
- Client risk assessment is based on the provider’s database or another source of information.
- Microfinance credit rating, reporting, and analytics.
- A credit decision-making system for banks/MFOs uses scoring models and credit rules to make lending decisions and an intelligent router for the product, promotion, and A/B testing applications.
- Customer identification score permits automated application status affixation based on the database and statistical analysis.
- Credit histories from the Bureau of Credit History.
- AI&ML for mathematically precise business choices based on open source big data analytics.
- Using non-personal data to assess device danger and protect users
- AFS is a software and hardware solution designed to automate financial processes.
- Transfer payment, fee, and credit product data from current customers.
- Gateway payments to a customer’s card (Portmone, IPAY, and analogs).
- 1C, ProFix, Lime systems, and others.
- Online loan repayment, self-service terminals, and cash banks.
- Payment system integration.
- Payment through terminals is possible.
- The CRM system maintains track of all credit applications, progress, and customer interactions.
- Customize actions in client work, send to a contact center, invite a branch, send SMS/IVR, and send to a partner.
- Scripts may be tailored to each customer’s needs.
- The system generates unique user links and gives bonus code constructor to attract new consumers to the product and rewards.
The website builder contains lending, borrower’s dashboard, investor’s personal information, document production, application system, and credit calculator.
The integration settings constructor (CPA) with traffic/lead generators takes 30 minutes to complete.
API Ready for Leads features a connecting partner interface that may make queries straight to the system without a URL.
SEO page builder
- Customer debt management CRM
- Robotic Contact Center for successful customer base analysis.
- Application for âCollectorsâ with unique UI and ability to filter credit portfolio by: automated lists for IVR, SMS, email, and push alerts, report scripting, document processing, and other adjustable parameters
These are modules. For example, a prospective user’s information, a borrower’s and lender’s registration; an ID card number; a bank account; personal data in third-party credit institutions; credit rating, and CRM.
5. BORROWER’S P2P CREDIT APPLICATION
Application, acknowledgment, credit, approval, assign, and loan administration are all processes in the credit process. P2P lending requires thorough application information.