Why security is king in P2P lending

From Stuart Law at FT Advisor:

“The Peer to Peer (P2P) lending market has risen from zero, around 10 years ago, to an outstanding investment level of more than £8.7bn of loans in the UK alone. Investors of all shapes and sizes are continuing to flock to the market, attracted by the prospect of a fair, risk-adjusted return on their capital and to beat the low rates offered from traditional sources. In fact, you’ll find what differentiates the various players in the market is how they deal with loan security. There are two key aspects to be examined in detail: 1) Pre-approval of loan: The checks put in place to ensure that high-quality loans are approved, where the loan can be afforded by the borrower but still recoverable in case one day it is not. 2) Post-approval of loan: The measures put in place to deal with loans defaulting and the recovery of capital in that situation.  ”

In the emerging market of peer-to-peer lending, it’s essential to present a security of funds and return for players in this market to attract investment. Investors concern more of their risk-adjusted return from an essential mean-variance analysis. Instead of focusing on promoting fancy and attractive conceptual terms, P2P lending providers need to show their effort in managing the risk exposure as for investors’ unit return of investment, as well as great management for dealing with repayments of loan. Capital Match is the largest player in Singapore the P2P Lending market with over $40 million origination, and it’s continuously offering investment invoice financing/PO financing options of good quality to help its investors have healthy growth of their portfolio.
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A Blockchain-Based Solution to Liquidity Needs

From Max Bronstein at Nasdaq:

“In a world where growth moves faster than payments, many small businesses struggle to pay off their urgent capital expenditures. Companies of all sizes have short-term costs that are integral to their operations: Office rent, short-term investments and employee salaries are all generally paid on a weekly or monthly basis, while accounts receivables can remain unpaid for 90 to 120 days. Blockchains are great for tokenizing financial assets and enforcing complex changes in ownership. Given the vast number of intermediaries necessary to manually assess the risk of each invoice, factoring can be made much more efficient and equitable by decentralizing the verification and payment functions.”

The cutting technology is driving the current market of P2P lending as well as Invoice Factoring. In Asia’s Fintech hub Singapore, market players are investing in these technology development to help SME’s financing in a more innovative and efficient way. Thanks to the support and investment from government, it is foreseeable that in the near future the technology will change the way of banking.  Continue reading