Peer To Peer Lending: Teamwork will Bring the Right Results

Financial technologies are introducing the latest breakthroughs in the Peer to Peer lending industry, making it possible for the P2P sector to create a place for itself in a short amount of time. As the banks prepare for the new developments, they prefer to team up with the marketplace lenders to build their customer base.

The world’s P2P market is gradually increasing with thousands of P2P lending platforms in various countries, running online and offline. The majority of the worldwide banks are continually teaming up with the fintech (financial-technology-based lenders) to provide services to their customers.

The International P2P lending market is progressing rapidly. The recent decline in the world economy has given rise to Peer to Peer lending in many countries. Due to this decline, the global banking system experienced a shortage of funds, and it became vulnerable because of too much bad debt. That led the regulators into thinking about new ways for increasing the banking capital. Hence they came up with a risky solution to work with Peer to Peer lending. To service this type of banking requirements, plenty of technology-focused platforms emerged in the market. They utilized technologies like big data and in-depth analytics to link borrowers with lenders. P2P platforms offer several benefits from low operating prices, minimum controlling restrictions, and effective services compared to conventional banks. That is why this sector is growing very fast.

With thousands of P2P platforms operating internationally. The banks can either compete with them or tactically team up with them to improve their profits. Providing an attractive offer for high earnings on investments and lower interest rates on loans. P2P lending is the latest innovation in the financial industry. It is becoming popular with all the borrowers internationally. P2P lending was first launched in the UK in 2005. Afterwards, many new Peer to Peer lending platforms started operating throughout the world, just like the ones in the UK.

Traditional banks will need to collaborate with the P2P Lending Platforms.

As P2P lending platforms become famous and they capture the attention of global customers. Banks have started to collaborate with them. But the banking system’s old rules and policies are the major hurdles preventing them from teaming up with the P2P platforms. On the other hand, collaborating with the P2P platform will offer banks a way to serve the formerly unreachable customer segment at a low price. That will make the balance sheet better and enhance the profits of the banks. So partnering with Peer to Peer lending platforms appears to be a feasible solution for the banks.

Being at the competing position with the banks, the Peer to Peer lenders also admit that they can benefit from partnering with the banks. The bigger markets in countries like the UK, US and China will take advantage of this partnership. The regulators are starting to acknowledge the developing risk of the P2P market. No doubt there will be regulatory policies for the P2P platforms but P2P lenders will reach out to a big customer base and benefit from the bank’s risk assessment process by partnering with the banks.

The governments are also regulating the collaboration between the banks and Peer to Peer lending platforms. So, for example, banks can  send the borrowers they cannot facilitate to the P2P lender in the UK.

The Outcome of the Above Discussion

Financial innovation like P2P lending is becoming popular worldwide among borrowers and lenders. That has led to the banks and P2P networks’ partnership to cater the global economic recession by raising the capital. With the trend increasing, many banks issue loans after the request has been launched on the Peer to Peer lending platform, making the collaboration even better. The bank supports these loans for a short time until a lender on the P2P network purchases them. In that case, the bank receives profit on the loan for the time it was backing it. The bank also obtains a fee from the P2P platform for this service.

Adrianna Tori

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