The pandemic has seen a complete overhaul of our lives. Most of the companies made the internet their workspace. As a brighterside, the pandemic saw some innovative business ideas. Many alternatives came up for people to earn money online. One such business is P2P lending.
- 1 What is P2P lending?
- 2 Working of P2P platforms
- 3 Relevance of P2P lending
- 4 Competition in the P2P lending industry
- 5 Research about your market
- 6 Ideas within the P2P lending industry
- 7 Key features of P2P lending apps
- 8 How to develop a P2P lending platform?
- 9 Deciding on business registration form
- 10 Registering the company name
- 11 Registering platform domain
- 12 Creating your team
- 13 Raising capital
- 14 Developing P2P platform
- 15 Creating Web portal
- 16 Testing your website and platform
What is P2P lending?
P2P lending also known as peer to peer lending or person to person lending is nothing but a money lending mechanism which integrates the creditors and the borrowers in a single platform. Peer to Peer lending makes it easier for individuals to get loans, directly from other individuals, without any middlemen. It is also known as social lending or crowd lending. This is done excluding the intermediaries like banks, credit brokers and other conventional financial institutions. Due to the absence of any intermediaries, the interest rates are low and the investor’s profit margin is greater. As mentioned earlier, P2P gives opportunity for both the creditors and borrowers to become users of the specialised P2P lending sites. This is viewed as a loan app by some specialists.
The P2P lending sites work on software developed by companies or intermediaries. How do they earn money? The answer is pretty simple. They will receive their income from both the borrowers and the creditors. This income can come in the form of fixed payments or as commission from the loan amount.
Working of P2P platforms
The P2P lending platform is a website or an app where both the creditors and borrowers can register themselves. The P2P platform has made the process of lending easy and hassle free. Borrowers now needn’t fill lots and lots of papers to get their loan amount. P2P lending is deemed to be a paperless loan approval method. The borrower simply has to post his loan amount request on the app along with the term of the loan and details about him. The platform checks for any risks and verifies the credit rating of the borrower. They then decide whether to grant the loan or not. Once the borrower passes this verification, his application will be visible to the creditors on the app. The rate of interest is generally set according to the tenure of the loan by the app algorithm. If any creditor is interested in loaning out his money, a loan agreement is made. If the borrower fails to pay the loan amount on time, debt creditors will get involved.
Relevance of P2P lending
The pandemic has disrupted everyone’s lives. The lockdowns and social restrictions have made it impossible for people to go out and perform their daily activities. Unemployment is at peak and financial resources of the individuals are getting depleted. Some people are looking for alternatives from where they can earn money at the comfort of their homes, while others are looking for sources from where they can borrow money. P2P lending platforms bring together the borrowers and creditors on a single platform.
So, as an entrepreneur, now is the time for you to discover the world of P2P lending and creating your own business. There is so much potential for you to tap into this niche. The need for money doesn’t go away. P2P lending platforms are expected to rise. The industry is only seeing an upward trend. The customers are attracted to an app that is user friendly, reliable and most importantly secure. While there are many platforms offering their services, there is still space for you to launch your own platform.
Competition in the P2P lending industry
Starting a P2P lending business is easy compared to other businesses. The activities of the business happen online. It doesn’t need any special equipment. All you need is good software to start with. Check out lending software solutions. But you need to be aware of the laws and regulations in place to keep the industry sane. There are different areas in which you can launch your P2P lending business. So, take your time and decide on the services you want to build your business. There are large P2P lending businesses as well as smaller ones. While the large establishments offer a wide range of services, the smaller ones stick to offering their services in one or two areas.
Research about your market
Before proceeding with developing P2P lending software for your business, you need to do thorough research about your market. Know who is going to use your app. Most likely, students, small businesses, start ups and other high risk individuals will be regular visitors to your app. Apart from this, there are individuals who avail your services to prevent long waits and heavy paperwork to get a loan.
Ideas within the P2P lending industry
As mentioned earlier, you can offer various services within the P2P lending industry. The business is all about screening the borrowers, verifying them and pooling lenders for their application. All of this process should happen quickly without involving much paperwork, bypassing the banks and conventional methods of borrowing. Here is a list of services your competitors specialize in. Some businesses offer their services in all the below mentioned niches, while some small businesses stick to offering their services in one or two niches. Let us take a look at the services the businesses specialize in. These services include student loans, medical loans, personal loans, business loans, micro loans, car loans, mortgages and so on. More services means more availability of creditors who are willing to part their cash. Check out lending software solutions.
Key features of P2P lending apps
Here is a list of key features that should be included in your P2P lending app.
- Login- The user should be able to register into the app by entering the personal and professional details. There should be an option for users to login through their social media platform.
- Applying for loan- Users can apply for instant loan within just a few clicks. The loan processing should be quick. But this doesn’t mean approving it without proper verification. The users just need to select their loan amount, agree on the interest rate and processing fee for completing the fund transfer.
- Payback Period- There should be an option for the borrowers to select tenure of their loan. The app algorithm will update the rate of interest depending on the loan tenure.
- Loan listing- This includes the list of loan options available to a user based on his credit score and other conditions.
- Interest calculation tool- This helps in calculating EMI and interest for the user depending on the tenure for their loan.
- Manual loan entry- The users can avail a loan by typing the amount they need manually. However, the loan grant depends on their credit score.
- Payment alerts- This alerts the users of their due dates. Through this option, the users can view their EMI schedule and completed installment payments.
- Transaction history- The user will get a complete summary of the loan amount, his EMI payments and available credit limit.
- Secure Payments- Since both the creditors and borrowers make transactions, it is necessary to protect their transaction details and other sensitive information. Also, if the app isn’t secure you will lose your customer base.
The users are offered loans depending on their needs. It is advisable to verify every user during their registration. Though this process delays the login, it is mandatory to prevent fraudsters from entering your app. Click on link for know top money lending software.
How to develop a P2P lending platform?
Here are some steps that will help you in building your own peer to peer lending platform.
Deciding on business registration form
You need to consider the following while registering your company. Registering your company as a corporation or limited liability company will save you from the creditors in case of bankruptcy. Corporations need to report their taxes and accounting regularly. They must also hold shareholder meetings regularly. Profits and losses should be shared according to the shares each participant holds. The terms are decided by the participants of the company.
Registering the company name
Once you decide on your business registration form, the next step is to get your business registered at the place it will operate. This place will be the main office. The company name you choose should be unique and one that is not in use. Users should get a clear idea of your operations by name of your company and the registration form.
Registering platform domain
Domain is nothing but your website address. Make sure that it isn’t too long. It should be easy to read. You can use abbreviations only if it is the abbreviated name of the brand. Domain name should be different from the company’s name. Register your domain depending on your operations. Bigger the domain zone, higher will be the registration amount. You also have an option to rent out a domain instead of buying it permanently.
Creating your team
Business requires effective manpower in place. Your business is nothing without a proper team in place. Select teammates who can be approached with seriousness. They should be able to guide you in case you face any difficulty. Your team should consist of experienced people from the banking sector. They should be well versed with financial law and credit business.
Capital is crucial to work on developing your app. You will need funds to pay for operating expenses, registering your domain and issuing first loans. There are different methods through which you can collect capital. You can reach out to a venture capitalist with a detailed business plan. You can rope in investors for your business. If nothing works, you can even take a loan from the bank. However, this will require a solid pledge.
Developing P2P platform
Once you have arranged for the capital, it is time to focus on the main aspects, building the lending platform. Creating an app or website requires technical skills, good command over programming languages and much more. Building an app from scratch will cost you more and will take 4 to 12 months to develop it. There are always cheaper and ready to use solutions like white label peer to peer lending platforms. Keep these things in mind while using a white label peer to peer lending platform. These are just samples for you and are in no way suitable for unique credit products. White label products contain fewer errors and enjoy a good customer base.
Creating Web portal
Since your business is online, it is necessary to have a good webportal. Aim for the following things while creating a site for peer lending. Your portal should include the maximum number of payment gateways, interface that supports different local languages and unique and recognizable website design.
Testing your website and platform
Once your app and website is ready, it needs to be tested for bugs before launching it in the market. Each part of the app must be tested and ensured that everything works as it should. You need to particularly look out for the security, usability and overall performance of the app. The payment gateways must be encrypted. The app should be understandable for the user. Not everyone has patience to wait long. So, as soon as the user registers himself on the app, he should directly be taken to the page where he can loan or lend money. Coming to test the performance of the site, check how fast the site is loading on different devices. Slow loading may discourage users from using it. You may not know how to conduct all these tests. So, hire a developer company that does all this job for you. Click on link for know top money lending software.
Now that your platform has passed all the tests successfully, it is time for you to launch it in the market. You need to have a strong marketing campaign to launch your site into the market. You can lure in your first customers by offering discounts, low interest rates and more loyal conditions for getting loans. But look out for scammers who would take a loan and disappear. Beware of hackers who might launch phishing resources to hack your website.
Technical support service
Despite all the testing, the platform is sure to have some errors and bugs after its launch. And these bugs are likely spotted by the users. So, look out for customers’ feedback on your app. Know what they are thinking and develop areas which need improvement. Be ready with your support service working with maximum load in the first few months. Even after launching your app, you should constantly monitor it for any bugs and errors. Add missing features and elements to your app in the form of update. Work on feedback from your users. This is a convenient way to gain their trust.
This is not it. You need to promote your app on various platforms to let people know about it. You need to spend some amount and time in advertising your app. Go for both conventional and modern ways of advertising. Give the customers some benefits in the start for choosing your app amongst various other options.
There are many money lending softwares available out there if you find it difficult to hire a development team. They are affordable and time-saving. Click on link for know top money lending software. Also, the cost of developing a P2P platform is high. You can opt for white label peer to peer lending and customize it according to your needs. You have got endless options and extensive features depending on the niche you choose. Focus on providing unique features. That’s what will make you stand out in the market. Stop worrying and start looking for solutions to develop your own P2P lending app.
About The Author
Hermit Chawla is a MD at AIS Technolabs which is a Web/App design and Development Company, helping global businesses to grow by Global Clients. He loves to share his thoughts on Web & App Development, Clone App Development and Game Development.