I would strongly recommend you think twice about P2P lending.
P2P lending is indeed beneficial for the borrowers, but the same can’t be said about the lenders. P2P lending often looks like savings account, smells like savings account and feels like savings account, but they are NOT savings accounts. Many savers will undoubtedly unknowingly expose themselves to risks that they don’t understand and cannot afford to take.
The two major risks are geographical/geopolitical risk and credit risk.
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The geographical/geopolitical risk is the simplest to understand, because most P2P lending platforms operate in only one specific geographical region, they don’t and can’t have a geographically diversified portfolio of borrowers. As a result of that, lenders are exposed to uncompensated geographical and geopolitical risk.
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The credit risk is slight more complex that that. In today’s financial world, most high quality borrowers (established & profitable business with good credit rating) would prefer either issuing their own bonds or borrowing from banks who usually offers them a more favourable interest rate than P2P lending platforms. Even subprime borrowers often get a quotation from banks and then compare that to the P2P lending offer. The dominating reason for someone to borrow via the P2P lending route instead of banks is usually a cheaper rate. Banks aren’t ignorant nor stupid, they charge a higher interest for good reasons (profitability is one of them, but that isn’t everything). Therefore, if a borrower ends up choosing P2P, it’s usually because the P2P platform has underestimated their risk of late payments and default. This exposes P2P lenders to under-compensated credit risk.
I highlighted the uncompensated geographical and geopolitical risk and under-compensated credit risk, because they are unique to P2P lenders.
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Banks don’t suffer from uncompensated geographical and geopolitical risk. Even if a bank only operates in one geographical region, they can still use swaps and other financial instruments to manage the risk exposure to the geographical region.
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Banks very rarely suffer from under-compensated credit risk, because by lending to a business, they are putting their own money at risk. Therefore they are more motivated (and have more resources) to perform accurate, detailed and rigid credit assessment than P2P lenders who depends on the P2P lending platform which doesn’t have their own money at risk to perform the assessments.
Considering the above risks, I can hardly agree that P2P lending will ever benefit the lenders. Unfortunately, average savers (investors, to be accurate) doesn’t know this and probably will never understand this.
If you really want to help your customers, please lend to SMEs as a bank, and pay most of the interest to your customers who has savings account with you. You, as a bank, can understand the risks involved, and should have the stomach for it. If borrowers mass default on their loans in a concentrated period of time, the worst case for you is to run down your capital reserve. However, in P2P lending, your customers will see a large chunk of their money accumulated over many years (or decades) disappearing from their accounts.