Peer-to-peer Lending
From Open Risk Manual
Definition
Peer-to-peer Lending (also P2P lending) is an organizational model for Banking financial services where Lending products (loans) between individuals or businesses are arranged through a service that matches directly lenders with borrowers without the intermediation of a central counterparty (e.g a Bank).
Characteristics
Peer-to-peer lending typically must reconfigure core aspects of the Lending Product Lifecycle:
- a platform to enable borrowers to meet lenders and investors to identify and purchase loans that meet their investment criteria
- the verification of borrower identity (KYC)
- performing borrower credit checks and filtering out the unqualified borrowers
- the development of credit models for loan approvals and pricing
- processing payments from borrowers and forwarding those payments to the lenders who invested in the loan
- Loan Servicing, providing customer service to borrowers
- collect payments from borrowers who are delinquent or in default
- legal compliance and reporting
