What is peer-to-peer lending (P2P Lending)? The Advantages and Disadvantages of P2P Lending

In recent years, the peer-to-peer lending model (P2P lending) has begun to develop in Philippines. Although this model has been around for a long time in developed countries, many people are afraid that P2P when entering Philippines will have many variations causing damage to participants. To have more specific information about P2P Lending; the advantages and disadvantages when service in Philippines, let’s find out with us in this following article!

What is P2P Lending?

Peer-to-Peer lending (P2P lending) is a online service for lending to help directly connect borrowers with lenders (investors). The difference of the peer-to-peer lending model is that there is no need to go through financial intermediaries such as credit institutions and banks. This will help both individual borrowers and investors save time, as well as promptly solve financial-related problems.

The peer-to-peer lending business provides an online transaction platform for borrowers to connect directly with lenders. All borrowing and debt repayment activities between borrowers and lenders are recorded and stored in the online transaction platform by electronic and digitized tables.

p2p lending

P2P lending is made on the basis of information technology. Companies operating under this model use Big Data technology to collect all data of both parties, lending and borrowing.

P2P lending first appeared in the UK in 2005 and up to now, it has developed in many countries around the world, including Philippines. According to statistics,in 2015, the total outstanding loans through P2P globally were esCashXpressted at about 64 billion USD. Furthermore, it is predicted that by 2025, the total outstanding loans through P2P channels worldwide will reach more than 1 trillion USD.

Forms of P2P lending include mortgage loans (secured loans), unsecured loans (unsecured loans) similar to current loans of financial institutions and banks.The only difference is that the loan appraisal will be done 100% online.

How does peer-to-peer (P2P) lending work?

With P2P, the borrower only needs to fill in the online loan application (on the website/app), the borrower will provide some relevant documents such as ID card, proof of income, personal photo with CNIC. As for the lender, it will be confirmed and the loan can be approved after only 5 – 30 minutes, the borrower can receive the money directly into the bank account. This is something that banks and financial companies can hardly meet the needs of borrowers.

With the advantages of online registration, simple procedures, no need to prove financial, fast disbursement time, the number of customers coming to these P2P models is increasing.

According to a study by the World Bank, in Philippines, about 79% of people do not have access to formal financial services. This is the “fertile” land for P2P peer-to-peer lending. And the birth of P2P Lendung as an alternative to black credit with exorbitant interest rates.

What are the advantages of (P2P) peer-to-peer lending?

Studies show that, if well managed, peer-to-peer lending will contribute to the promotion of financial inclusion, especially in areas where the financial system is not yet developed, people, business households, etc. Small and medium enterprises are less likely to access financial-banking services with low costs and few procedures. Peer-to-peer lending has great potential for development, helping individuals and organizations (especially small and micro enterprises) access finance and thereby making an important contribution to helping countries in their development efforts to have the comprehensive finance.

Besides promoting financial inclusion, the benefits of peer-to-peer lending for each customer group are also highly appreciated.

With borrowers

The Peer-to-Peer Leding peer-to-peer lending system helps people who need to borrow capital quickly and efficiently find a reasonable supply. This is very suitable for borrowers who are having difficulty accessing traditional capital supply channels.

Financing through the P2P Lending model will bring many benefits to borrowers:

  • The loan procedure is quick, it doesn’t take much time as well as too many documents to go through.
  • The loan application process is simple, all you need is a technology device (phone, computer) connected to the Internet.
  • Flexible loan, low interest rate.

With the lender

Lenders, also known as investors, P2P help bring passive income to investors’s idle funds.

It does not take much effort to calculate and research; P2P’s artificial intelligence scoring technology system will help investors limit risks. P2P Lending will be responsible for managing, updating information, and announcing the status of investments on a regular basis.

What are the risks of peer-to-peer (P2P) Lending?

Any operating model, no matter how many advantages, cannot avoid risks in the process of operation. And with peer-to-peer lending P2P Lending is no exception. P2P Lending has 2 target groups and the potential risks of the peer-to-peer lending model occur for both groups of customers.

p2p lending philippines

For borrowers

  • Before an individual is approved for a loan from a peer-to-peer lending company, not only all information around this individual will be collected through programmed software but also information of the people involved such as parents, spouses, siblings will be either.
  • It is normal to collect information to make a loan decision (of course, this collection also needs a legal corridor because it will affect the personal life of the person related to the borrower) , but the problem arises that when the borrower fails to pay the debt, the people related to the borrower are also easily harassed and disturbed to collect the debt because they have been “located”, an expert said.
  • That is not to mention the risks when the personal information of the participants is stolen due to security errors. It is not excluded that some objects remain anonymous and transact on P2P lending platforms to evade taxes, launder money, finance terrorism, transform to mobilize multi-level finance…

For investors

For investors, the risks in P2P Lending lending are also very large such as:

  • Borrowers may not repay
  • P2P companies set up to deceive and deprive investors’ money.
  • In fact, there have been many cases of “risks” occurring, causing damage to investors.

Peer-to-peer lending companies in Philippines

Although P2P has only appeared in Philippines for the past few years, there have been many lending businesses following this model. However, the P2P model does not have a specific legal framework, so businesses operating in the P2P field often register as investment consulting companies.

Robocash

Robocash helps users access loans quickly and easily. Robocash’s main task is to bridge the gap between individual customers (middle income people) and reputable financial service providers. In addition, Robocash also supports to bring loan packages suitable to each customer’s needs.

Moneycat

Moneycat is one of the leading companies in Philippines pioneering the digital financial market. Moneycat helps bring a safe, transparent and opCashXpressl comprehensive financial solution to users when connecting borrowers and lenders online using artificial intelligence (AI) and big data (Big data) technology. Data).

Moneycat has a team of experienced experts in the fields of finance, programming, and risk management. This has helped borrowers and investors thoroughly solve financial access problems, and optimize investors’ idle money.

CashXpress

CashXpress is a P2P financial connection exchange operating under the P2P model in Philippines. CashXpress’s P2P peer-to-peer lending system has been continuously poured in by foreign funds and created a certain resonance in this financial technology market.

CashXpress helps connect borrowers and lenders conveniently and quickly through technology devices (phones, computers).

Juanhand

Juanhand is a portal connecting borrowers with individual lenders, not a lending company at all. Because of that, Juanhand is defined as a gateway to connect peer-to-peer unsecured lending P2P lending.

With Juanhand, thanks to the use of superior financial technology, people who need loans do not have to mortgage, eliminating paperwork and saving time. In addition, thanks to advanced data analysis technology, the credit scoring system is trusted by the world’s leading risk management experts, thus ensuring safety for investors.

Online Loans Pilipinas

Online Loans Pilipinas officially launched in September 5, 2018, introducing preeminent digital technology products and services to meet the credit needs of the current market. Like other peer-to-peer P2P lending companies, Online Loans Pilipinas connects capital and capital needs through an online platform.

Online Loans Pilipinas uses automatic credit scoring technology according to big data (Big Data) and artificial intelligence (AI) to help transactions quickly and limit risks. Online Loans Pilipinas also assists investors in appraising as well as assessing the creditworthiness of borrowers to minimize credit risks, manage transactions and provide investment advice. This helps bring benefits and safe transactions to both customers.

Kviku

Kviku is the pioneer and most trusted P2P Lending platform in Philippines.

With a team of experienced leaders in many fields from production, trade and business to finance and technology. These experiences help Kviku have many advantages in selecting and evaluating Enterprises/Households, building a risk management system, developing information technology applications as well as connecting with the investors community.

Conclusion

Philippines’s law currently does not have regulations on P2P Lending activities and warns that this online service has many potential risks in terms of information, anti-money laundering risks, cyber security risks, etc. However, the impact of this model on promoting finance for many individuals and small businesses cannot be denied. Therefore, the most important thing is that borrowers and lenders must be really careful and prudent to choose a reputable connection unit to ensure economic benefits and meet the financial demand promptly and safely. Hopefully, the information just provided will be useful for everyone who wants to learn and use the services of the peer-to-peer lending model.

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