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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The future of Millennial banking

From Marketing Interactive:

“Throughout the history of banking, financial institutions have been the centre of all transactions for consumers and businesses. Large institutions held control of the industry.In the last ten years, the fundamental assumption that financial institutions are the only avenue to financial transactions is being called to question, especially by Millennials, who are by far the most entrepreneurial generation. This creates opportunities for peer to peer (P2P) lending marketplaces such as Prosper and Lending Club, platforms which create alternative ways to access cash loans while providing alternative yields on deposits. ”

Newly introduced peer-to-peer lending platforms are now an alternative source of yielding higher return with controlled risk compared with traditional banking. The banking system is now changed to a new ways where multiple players (e.g. Fintech) are filling gaps from traditional banking. In Singapore, the SME invoice financing sector is now moved to alternative lending side with big players such as Capital Match which provides professional services in credit assessment and factoring.

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