Why Is P2P Loan App Development The Right Thing To Do For A Fintech Startup?
COVID-19 has changed the game in the financial sector to a great extent. People have become more saving conscious and financially responsible. After all, running a business, paying off debts, and medical bills (can’t miss) have been significant expenses since the pandemic. And taking loans from banks was the last option for many people until businesses started developing P2P loan apps like Prosper and LendingClub.
Peer-to-peer loan lending apps tend to win prospects over quickly because they offer;
- Lesser operating cost and low market risk for both lenders and borrowers;
- Digitization in the finance sector improves transparency through the system over traditional banking system;
- Slash interest rates that appeal to the consumers;
On the other hand, Peer-to-peer loan lending development gives an opportunity to new-age financial institutions to operate online and taps into the peer-to-peer marketplace. Thereupon, many businesses in the industry start rolling P2P loan lending platforms. Such platforms come in the form of a secured website and/or mobile app to connect lenders with borrowers quickly.
Why is there so much noise for P2P loan app development anyway?
Not so long ago, people started to see personal loans as a way out to get rid of debts at a lower rate. Not only debts but personal loans also became the primary choice to fund startup businesses. Moreover, statistics report that over half of total Americans (around 131 million), have taken out a personal loan in their lifetime.
Consequently, the circumstances forced lenders to make it difficult for people to qualify for a loan. Sadly, some moneylenders had to stop offering loans altogether in March 2020, right when the coronavirus outbreak knocked the US.
For such financial disasters, technology-driven peer-to-peer loan lending solutions emerged to disrupt the industry. And guess what? The Peer-to-Peer Lending Market valued at $84.89 Billion in 2020. And looking at its growth, it’s projected to reach $578.03 Billion by 2028.
Okay, I want to make an app like Prosper and LendingClub, but will it be worth it?
Well, look at the projection. It says out loud how much return your investment in P2P loan App Development can potentially gain. You can also accelerate P2P lending app demand-stimulating factors with cutting-edge technology to drive more business.
For example, by introducing blockchain to your platform, you can facilitate safe and quick access to funds, eliminating complex and costly processes of banks. Now when you market your app, the audience will more likely give it a shot. Because security is one of the primary prerequisites for FinTech solutions to attract users.
As I said, Prosper and LendingClub are two perfect examples of the P2P loan app development solution. These platforms let their users pay less while borrowing and earn more when saving.
Let’s take a closer Look At LendingClub and Prosper
LendingClub— San Francisco, California
LendingClub is a web and mobile-based P2P lending application that has been around since 2007. Essentially, it focuses on four types of loans: auto refinancing, personal, business, and medical loans. With over three million members, the Club has given out over $50B worth of loans.
Prosper— San Francisco, California
Prosper is one of the pioneer peer-to-peer lending marketplaces in the United States founded in 2005. The platform lets investors invest by browsing and selecting loans from listings. In contrast, it recommends loans to borrowers based on their profile. So far, they have facilitated more than $17 billion in loans.
Prosper is also available on iOS and Android apps but only for investors and none for borrowers. Borrowers can use the Prosper online app on desktop and mobile browsers.
You must be worried about how your business will make money out of a P2P loan app. Right? So, let’s find out.
Business Model for P2P loan App
When strategizing your business plan for P2P loan app development, consider the below widely-used revenue streams.
1. Origination fee. P2P loan platforms charge upfront fees at the loan origination from borrowers. In return, the app reviews borrowers’ creditworthiness, providing access to its investors. The rates are usually between 1 to 6%.
2. Ongoing fee. The app also earns through a margin on the interest rate paid by borrowers to investors. To clarify, if a borrower lends at a 6.5% interest, then the investor is paid 5.5% interest. In that case, the 1% interest rate is received by the platform.
3. Premium subscription. With additional or premium services, many lending marketplaces offer membership and paid accounts and generate extra revenue. For example, LendingClub offers a PRIME subscription plan with a minimum investment of $5,000 for a one-time 0.8% fee.
Features to Make an app like Prosper and LendingClub
In on-demand app development, you can always include advanced features to stand out from the competition. But if you are testing the market with the MVP of your P2P loan marketplace, you can count on the below general features.
- Document management
- Loan/EMI Calculator
- AML/KYC Verification
- Credit Score Calculation
- Payment Schedule
- Apply interest on the used amount
- Transfer & Withdrawal
- Refinance management
- Repay options
- Document scanner
- Chatbot support
Features for your Admin panel
- Lender management
- Borrower management
- KYC approval
- Real-time analytics
- Loan management
- Notification management
- Subscription, transaction, and other charges management
What does it Cost to Develop P2P loan Apps like Prosper and LendingClub?
The P2P loan App Development Cost is more than just about frontend and backend development charges. Despite hiring mobile app developers, you make many choices for your loan application development. For example, whether developing an Android or iOS app, how many features to add to project requirements, which technologies and APIs to opt for, need complex UI/UX design or simple, etc.
However, reckoning from our experience, P2P loan app development may cost anywhere between $30,000 and $84,000. If you want to manage your budget, I would recommend studying app development cost variation factors closely.
In a nutshell,
“P2P lending mobile app development challenges the loan system’s status quo.”
P2P loan lending marketplaces are a valuable innovation in the finance sector that helps not only borrowers but also lenders to save money. I am sure; if you research the market, you will find areas that other services haven’t covered yet. Given that the market needs more P2P lending apps, specifically mobile, as now we live in a mobile-first world.
That’s it. There is your chance to stand. You better start examining the loophole in the current lending system that you can close via developing a P2P lending mobile app. As for the rest of the technical development part, consult with our experts that have been guiding startuppers for ages.