Peer to Peer (P2P) lending is a different way to get a loan from a bank or credit union. If a person goes to the bank to get a loan, the bank will grant the loan using some of its assets that other customers have deposited.
If we talk of statistics, then as per the reports by Allied Market Research, the total market size of P2P lending will exponentially grow to a record high of $558.91 billion by the end of 2027, which is a clear spike of 30% as compared to 2020.
So before we deep dive into the development guide, let’s get a broader viewpoint on P2P lending.
What is Peer to Peer Lending?
Individuals can obtain loans directly from investors through peer-to-peer lending without any involvement of third-party applications; thus, peer-to-peer lending is also known as direct financing. It is also a strong lending alternative to traditional bank and credit union services.
Mintos, Credimi, and Twino are some of the most popular P2P platforms. These peer-to-peer platforms make money by charging fees to both borrowers and investors.
Below are some quick points to keep in mind before you can think of creating a P2P lending platform:
- Some countries have licensing requirements, while others do not need it as a licensing requirement. But the sooner you begin the legal preparations, the earlier you will be able to launch your P2P lending business.
- You can create a custom P2P lending platform in-house or by leveraging the technological expertise of a software development partner.
- Creating a peer-to-peer (P2P) lending platform is not as simple as it appears; there are several processes and techniques to consider before developing an app based on client needs and market trends.
So now, without wasting much more time, let’s understand the procedure to develop a P2P lending platform.
Designing process in Peer to Peer (P2P) lending platform:
A peer-to-peer (P2P) lending platform necessitates both talent and experience. Thus a person with only basic design knowledge cannot create an innovative design. Rather someone with extensive experience and expertise in the stock market can create a platform very smoothly.
However, before designing the Peer to Peer (P2P) lending platform, it is necessary to have a thorough understanding of how the corporate system works and its activities.
Data Science in Peer-to-Peer (P2P) lending platform:
Before we explain the importance of Data Analytics and Data Science in P2P lending platform development, let’s quickly get a brief idea about both terms.
Data science, also known as data-driven science, combines elements of several disciplines with the use of computation to evaluate vast amounts of data for decision-making.
While data analytics, with the help of the collected data, aids in the discovery of solutions. It assists in identifying the user’s behavior while using the app and drawing conclusions based on the user’s experience with the help of data collected.
Data analytics and data science play a critical role in Peer to Peer (P2P) lending platforms. They collect all the data regarding the economic condition, customer purchasing power, and various other factors, which are responsible for influencing the stock market directly.
Cost for developing Peer to Peer (P2P) lending platform:
The cost of developing P2P lending platforms varies a lot based on multiple factors, but the most vital one is if you need a customized P2P lending platform or a ready-made solution, i.e. white labeled.
If you go with a customized P2P lending platform, the cost to build the platform and the project timelines will be significant in numbers when compared with the ready-made solution.
Let’s get into more detail about the customized P2P lending platform.
A customized professional P2P lending platform typically costs $1,00,000 or more to develop, which includes:
- A customized layout for a specific niche of P2P lending platform;
- A functioning payment processing system;
- Content management system for marketing and SEO;
- KYC/AML verification that is automated;
- Features to invest in debt and equity;
- Customized investment and settlement flow following your regulations and business needs;
- Account management, search and filtering, and so on.
Timeline for developing Peer to Peer (P2P) lending platform:
Developing a platform is a simple task with proper guidance and team support. The timeline for the Peer to Peer (P2P) lending platform depends on the type and nature of the platform; if the platform is too complex and requires too many features, it will take more time; if the platform is simple, it will take less time.
Crowdfunding and P2P lending software
With off-the-shelf software, it is possible to reduce the cost of developing a P2P lending platform and launch it faster. Several options are available in the market, and they differ in terms of complexity, support, customization, and price.
The majority of them are easily integrated via APIs and can be customized to meet the needs of site owners. It’s ideal if you want to start with an MVP and then scale up to a more advanced platform.
Peer-to-Peer (P2P) Lending Platform Development Features:
It’s an excellent tool for explaining the benefits and risks of doing business with you to newcomers. Visitors can use loan calculators to estimate monthly payments based on the loan amount, term, and interest rate.
Integrate a calculator right in the first block of your Homepage to generate leads, or create a separate page with instructions on how to use the tool. A loan calculator estimates monthly repayments and total interest payable based on the initial loan amount, term, and interest rate.
Credit score checker
A credit score check option, in addition to the previously described online calculator, can be an excellent addition. Instead of putting a simple contact form on your website, you can make it more functional.
Unlike traditional contact forms, we recommend adding more questions to speed-up communication.
An auto-invest option allows users to quickly and easily diversify their portfolio by specifying an investment amount they are willing to risk. According to the Grupeer official website, backers can create a portfolio with an auto-invest option that can generate +12-13% of return per year.
IFISA is an acronym that stands for Innovative Finance. Accounts that allow investors to participate in peer-to-peer lending while receiving tax breaks. IFISAs imply that no taxes will be paid on investments made as opposed to Cash ISAs, Share ISAs, and Stocks.
Such tax-free opportunities are very appealing to investors, so more and more crowdlending platforms are including this feature. However, not all payment gateways support IFISAs, those that do stand out from the crowd.
Secondary markets used to be uncommon, but now they are available on nearly every crowdfunding platform. We’ve already discussed how the secondary market works and why incorporating the secondary market into the platform is a good idea.
In a nutshell, secondary markets benefit investors by allowing them to maximize profits by selling/buying investments at a premium/discount, getting rid of illiquid assets, and purchasing unavailable investments.
Assuming you are looking for a development partner, the following are the steps you should expect to take:
- close interaction with a sales manager and a business analyst
- A phase of project discovery and technical documentation creation
- determining a collaboration model, such as a dedicated team, fixed-price, or time-and-materials;
- Depending on the project and requirements, full-cycle development or specific feature creation;
- polishing, bug-fixing, and acceptance
- More development or more support and maintenance?
- Companies typically use business analysts to gather project requirements and ensure product-market fit.
Based on that information, the following documentation will serve as a roadmap to P2P lending platform development:
- specification of requirements;
- Product design and specification of features
- It will assist us in staying on track and building the product according to the specifications within the estimated budget.
P2P lending platform development is developed on scrum methodology, which aids in task completion in sprints and is an efficient framework for collaboration.
You can anticipate the following outcomes once the project is over:
- As stated in the agreement, you get ownership of the product, its source code, documentation, and other assets.
- You may be able to patent solutions or practices developed during the custom software development process.
- After completion of the work, any additional features not included in the project estimation document will be charged separately.
After this long discussion, it’s now the perfect time to understand the benefits of the P2P platform for borrowers and its investors.
Some of the most prominent benefits of the Peer-to-Peer (P2P) platform for borrowers are as follows:
- The P2P platforms aid in the rapid generation of loans.
- It offers loans with lower-than-average interest rates.
- It ensures fixed monthly payments.
- Credit requirements may be less stringent than those imposed by banks when making loans.
- The funds borrowed from these P2P platforms can be used for various purposes based on the requirements.
Some of the notable benefits of the Peer-to-Peer (P2P) platform for its investors are as follows:
- It contributes to a higher yield than current deposits and savings bank accounts.
- The P2P platform contributes to the availability of investment options other than stocks and bonds.
- It is adaptable, and you can invest any amount in your chosen portfolio.
There are numerous approaches to establishing a P2P lending company. And along with that, multiple solutions are available on the internet that provides various business and lending perspectives. But you shouldn’t forget that your job is to find a team that can either implement your ideas or guides you through the development process.