The last decade has seen several financial innovations. Bitcoin, blockchain technology, and Peer-to-Peer (P2P) lending are some of the new financial avenues that are driving a paradigm shift from big banks and the deepest pockets to smart individuals and startups.
India has always been a big Peer-to-Peer borrowing and lending market since 2012, well served by the individual moneylenders for a fast personal loan, with the bank and formal loans only comprising a minuscule 15% of the market share. A majority of Indians rely on their friends, family members, acquaintances, money lenders, and business associates for borrowing money even today. The largest offline crowdfunding market of the world is now also evolving to be a giant online P2P lending marketplace. P2P loans have the same hassle-free access, reliability, and speed, for resolving a number of domestic and business financial anxieties, that the earlier offline financial loans provided.
While the UK was the first country to have a P2P lending online platform named Zopa, P2P Lending started taking shape in 2012. With the expansion of the internet, Indians got access to P2P loans that were devoid of physical documentation hassles, and the long loan processing time intervals. P2P loans can also be availed by borrowers who are looking for short-term loans with a shorter turnaround time. The P2P market is filling this gap by easing the process of both availing and funding a loan. Many businesses in India are asset-light, the country is primarily a services-driven economy. As banks required businesses to have a heavy asset strength for getting a loan, many businessmen could not easily get the loans for business purposes. P2P loans are also quite popular among businessmen today, with 30% of all loans being taken at reputed Peer-to-peer lending websites like LenDenClub, for business purposes. Peer to Peer borrowing is always good at rescuing individuals out of their financial dilemmas.
As of now, more than 30 online startups are being accessed by millions of borrowers and lenders, for fast personal loans, business loans, festival loans and other kinds of loans in India with a continuously growing number. The best amongst them, including LenDenClub, derive their popularity out of the customer-friendly services, and by offering online lending services at least of the service fee. Lenders can browse through the different interest rates for the borrowers based on the credit score they get for investing in the loans. They can divide their net investment into any number of fragments, all having different interest rates, thereby building profitable and diverse portfolios. Online lending has tremendous popularity in India today, much in line with the rest of the world.
Peer-to-Peer Lending has seen the entry of big players like CRED and BharatPe which has made it boom even further. The segment has been able to deliver higher returns than other traditional asset classes. It is seeing consistent growth in the investor base and with the projected numbers, seems to be even more promising in the near future.