P2P Lending Software
For years, peer-to-peer lending has become the norm for individuals or small businesses that are building credit or unable to take out a loan. The Lending Club and Prosper, the two largest peer-to-peer lending companies in the U.S. have been attracting both lenders and borrowers since the recession, with the appeal of less qualifications required than a major bank and smaller interest rates than a payday lender.
It’s not just gaining traction in the U.S. – an article in the San Francisco Gate explained that peer-to-peer lending in the U.K. is “thriving.” The British coalition’s Business Finance Partnership program has been providing peer-to-peer lending companies with funds in an effort to diversify commercial funding. Similar American programs have had the same effect. Now, the article said, it’s possible that traditional banks only originate 25 percent of all U.S. loans.
With this, however, comes new regulations.
“Growth in the peer-to-peer lending industry has continued almost unchecked throughout the duration of the global recession, apart from a brief period in 2008 when some firms were forced to restructure their business after the Securities and Exchange Commission (SEC) announced that all loans were to be registered as securities,” the article read.
Using software to prepare for future regulations
For any business in the peer-to-peer lending market, preparing to adopt new practices due to the rise in the industry may be tricky. For years the market went unnoticed by regulators, and it’s unsurprising that now that the recovery is underway the SEC can look more into peer-to-peer practices. Even for businesses like The Lending Club and Prosper that aren’t new to the market, new requirements can still trip up any veteran. Risk management software can give peer-to-peer lending companies more information regarding their borrowers, allowing them to adopt new rules more easily, as well as keep up with the growing industry.