P2P Lending Overview
P2P lending has disrupted the financial sector and emerged as a worthy competitor to the traditional banking model with its instantaneous loan approval process and the prospect of extending credit even to the borrowers with feeble credit score who wouldn’t normally get an opportunity to avail a bank loan. The P2P lending software is dominant by marketplace lenders and that is highly customizable. The P2P lending software is to connect the borrowers and lenders with automated risk evaluation.
What’s unique about this sector is the way P2P sites source capital from investors through their platform rather than investing from their own pockets. Due to this, the lending process has no impact whatsoever on the balance sheet of a P2P platform. Instead, they earn revenue by collecting commission fees for playing as matchmakers between the borrowers and investors.
Both investors and borrowers are flocking towards this new asset class called Peer-to-Peer lending sites as the investors get an option to choose their risk appetite and earn high yielding returns while the borrowers get an opportunity to avail the access to credit almost instantaneously right from the comforts of their home.
P2P loans are generally collateral free unsecured loans which are paid back with interest by borrowers. The interest rate is usually fixed by the platform or decided upon when the borrower and lender sign the loan agreement. Our P2P lending software platform supports excellent automation for fast loan application approvals.
The holistic approach exerted by P2P platforms towards mitigating risks comes as a blessing to borrowers who either have a poor credit score or no prior credit history. Borrowers could either be individuals or an SME who needs money instantaneously.
The hassle-free application process, lightning-fast approval, and the reasonable interest rates offered by the P2P platforms seem to draw borrowers like moths to a flame.
The investors are usually the flock of individuals who are annoyed with the traditional lending industry. The meagre interest rates offered by banks on deposits, skyrocketing real estate prices, wavering gold value, and unstable nature of stocks prompt them to move towards the P2P lending space as they get the advantage of choosing their risk appetite to earn higher yields.
The Loan Process
The loan lifecycle in P2P lending has five stages. Here they are:
Before a platform starts accepting loan application, they build an investor base. Based on the country, the revenue model and risk factor involved the investors might vary from newbies trying their luck in the new asset class to retail lenders & wealthy businessmen.
Prospective borrowers apply for loans through the platform’s front-end interface which requests their personal and financial information to evaluate their credit risk. The information collected by the portal is sent to a back-end application which duly stores all the data for verification.
During this phase, the P2P platforms screen the applications they’ve received in order to determine the risk profile of a borrower. The platforms tend to use third-party applications to assess the creditworthiness of borrowers. Even if a borrower has no prior credit history, the innovative risk assessment models like social credit scoring sort it out by helping the platforms analyse the trustworthiness of a borrower based on their social media behaviour, online purchasing trends, individual expenditure, etc.
After the risk assessment phase, the loan amount requested and borrower information with their risk level will be listed for the investors to view. The investors could choose a borrower based on their risk appetite. Platforms usually advise investors to spread their investments across various loans in order to mitigate the risk. The P2P platforms disburse the money to the borrower’s account (after detecting the commission charges) once an investor approves the loan application and decides to fund their application.
Once the loan is disbursed the repayment is collected from the borrower by the platform and transferred to the investor’s account after deducting the commission charges, if any. In case of delinquency, the platforms depend on debt collection agencies to retrieve the loan.
Challenges faced by P2P Platforms
Despite being crowned as the social media of the financial sector, this promising technology backed Fintech disruptor poses as much risk as the promise it holds. Here are a few common challenges faced by P2P platforms:
The reason why several borrowers flock towards P2P platforms is that the loan processing time is lightning fast. In order to ensure a quick turnaround time while mitigating the risk factor, the loan process workflow would have to be streamlined. The platforms don’t have the luxury of coping with redundancy or process bottlenecks when their borrowers expect an instantaneous loan process.
Determining the risk factor associated with a borrower accurately and segregating them based on their risk profile in a short span of time is rather hard. To make sure they offer the investors proper insight, the P2P sites have to ensure that the technology behind their credit analysis phase is quick and efficient enough to decipher the correct result.
Once the loans have been disbursed, the platforms have to keep track of the repayments made by the borrowers and deduct potential defaults by taking note of delinquencies religiously. Designated rules have to be set as per the internal processes to track and monitor repayments which would raise red flags automatically to maximise revenue and reduce the chance of defaults.
CloudBankIN - A Phenomenal P2P Lending Software
CloudBankIN is a flexible P2P lending software backed by efficient technology which reduces the workload of P2P Platforms and assists them to exceed the expectations of their customers. Our cost-efficient P2P lending software technology solution comes with an array of sophisticated features which would streamline the overall workflow of a P2P platform without making a dent in the IT expense.
P2P platforms tend to gain traction more quickly in the financial sector and the easily scalable aspect of our product helps them expand their horizon and diversify their portfolio without any technological hiccups. CloudBankIN being a multi-faceted cloud-based application makes the customer onboarding a breeze by offering the prospective borrowers and investors to access the portal from anywhere, anytime.
The state-of-the-art security offered by CloudBankIN helps P2P lending software platforms alleviate potential cybersecurity threats, and its intuitive business analytics engine will give a 360-degree view of the platform to make intelligent business decisions which drive revenue. The P2P lending software is more accurate and data security software.
Fully Automated Workflow
100+ Pre-defined Reports
Omni Channel Compatibility
Lighning Fast Processing
Flexible & Scalable Nature
Seamless API Integration
Powerful Reporting Structure
Loan Lifecycle Management
P2P platforms use their front-end interface to onboard their borrowers and investors. To make the onboarding process as easy and efficient as possible. CloudBankIN offers a seamless integration with an array of front-end interfaces like web portal, mobile app and manual bulk upload option for offline applications.
This effortless integration automatically fetches relevant borrower information and stores them in the cloud database paving the way for auto-decisioning and quick turnaround time. P2P Platforms could integrate CloudBankIN with their existing front-end web portal or hire our web developers to develop a unique web portal which could then be integrated with CloudBankIN.
- Easy Onboarding
- Lightning Fast Approval
CloudBankIN cloud-based lending management system assists P2P platforms to track, monitor and manage all loan products and loan accounts in a user-friendly environment. Our rules-based engine comes with a preset of industries best practices, but it is possible to customize every aspect of a loan product like interest type (flat or declining), time period, transaction fees, amortisation schedule etc. to meet the unique needs of every loan agreement. All the related loan documents and could be uploaded and stored for reference within a borrower’s loan account.
- Stringent Underwriting
- Customizable Loan Products
- Rule-Based Automation
Our intelligent collection management system is designed in such a way to automate the loan collection process and make it hassle free for the investors by sending automated reminder emails and SMS to borrowers.
It gives the platform to keep track of every little detail in the collection process from the repayment date, outstanding arrears, delinquencies and write-offs in the same window.
- Automated Collection Workflow
- Robust Delinquency Tracking
- Instant Payment Updates
- Track Loan Performance
With CloudBankIN the P2P platforms need not resort to using a traditional accounting software. The built-in powerful accounting module comprises of all accounting functionalities which are present in a sophisticated accounting software like the chart of accounts, journal entries (manual or automated), configuring taxes and interest rate. The repayments are mapped to reflect instantaneously on accounting reports like Income statement & balance sheet.
- Accrual Accounting
- Configurable Accounting Rules
- Instantaneous Update
Our brilliant business analytical engine analyses every aspect of a loan portfolio based on the predefined set of rules to generate intuitive reports (100+ ready-to-use reports) that provide a peek into the real-time key performance indicators of your loan portfolio.
CloudBankIN uses data from disparate sources, consolidates it and administers analytics over the huge chunk of data to derive relevant business trends and predictions from them. The interactive executive dashboard would help you to keep an eye on the important parameters like investor and borrower ratio, the outstanding repayments, amount of loan processed, delinquencies, etc. from anywhere, anytime at a glance.
- Predictive Analytics
- Ad-hoc Reports
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