Digitalization across the banking sector is trending as it has reduced the complications associated with the peer-to-peer lending process
Peer-to-Peer Lending, also referred to as P2P Lending, is
basically the process of lending money directly to different people or
companies over the Internet, such as through online peer-to-peer lenders
matching lenders and borrowers for a specific amount. Peer-to-peer lending is
relatively easy to find because it is more often than not found on the
Internet. In fact, there are more lenders on the Internet today than there are
offline banks and lending institutions. Most people use these services because
it is the easiest way to receive a loan, especially if they have a bad credit
history. Since these loans are secured, they offer better rates than other
types of loans.
Factors such as lesser operating cost and lower market risk for
the lenders and the borrowers is driving the market growth of peer
to peer lending. Growing digitization in the banking sector is again adding
impetus growth to the market of peer to peer lending. According to the World
Bank study, 140 million unbanked individuals opened their first-ever account to
receive digital payments in 2017. Growth in the number of small business
lending entities coupled with the emerging countries such as India and China is
further anticipated to foster the market growth of the peer to peer lending. On
the other hand, the risk of losing money and increasing the implementation of
strict government rules is expected to inhibit the market growth of
peer-to-peer lending over the forecast period.
The Asia Pacific is expected to exhibit significant growth over
the forecast period and this is attributed to the presence of the young
population especially in India and Japan. According to the World Economic
Forum, India is home to a fifth of the world's youth. Half of its population of
1.3 billion is below the age of 25, and a quarter is below the age of 14.
Key Developments:
1. In May 2020,
5paisa.com has launched a peer-to-peer lending platform, where one can lend
from Rs 500 - Rs 50 lakhs to multiple borrowers and earn interest as high as 36
percent per annum.
2. In March
2020, WeOwn expands business finance platform with the launch of a peer-to-peer
lending marketplace
3. In September
2020, Bitfinex has entered the lending market with a new platform that allows
users to take part in peer-to-peer lending while earning interest
4. In February
2020, LenDenClub, a peer-to-peer lending platform, has partnered with
Singapore-based CredoLab, a developer of bank-grade digital credit scorecards
based on smartphone metadata.
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