In recent years, the popularity of peer-to-peer lending companies has been growing steadily. In the period from 2014 to 2015, the cost of global P2P lending increased by a factor of 7. In 2015, the global P2P lending market was valued at $64 billion. It is expected that by 2025 its value will approach $1000 billion. For this reason, more and more financial institutions are open to alternatives in the fintech industry – P2P lending platforms designed for the needs of end-users. Who are they? Borrowers and investors. What do they need from lending services? Fast and safe loan processing, more credit approvals and lower loss rates, an easy-to-navigate online platform (high demand for mobile applications).

In this article, we explore the top 5 P2P lending companies that have broken into the market and continue to attract the target audience. They develop top-level solutions – AI-powered platforms with special functions and options, ML algorithms, big data tools, and other industry-specific features.

What Is a Peer-to-Peer Lending Company and How Does It Work?

P2P lending (that is usually short for peer-to-peer or person-to-person) is a widely spread model for loan services. Some individuals lend money on condition that others will pay it back later. They often make payments towards a loan gradually for a fixed term. As a rule, interest is also paid in addition. However, there must be someone or something that could connect lenders and borrowers. For that reason, a P2P lending company was founded. Zopa was the first peer-to-peer lending company in the UK, and Prosper was the first US peer-to-peer lending marketplace. Both first peer 2 peer lending companies were founded in 2005.

How does a P2P lending company work? They have special platforms developed based on the key functions of the given business area: 

  • To form and manage a customer database;
  • To store personal loan listings and other data;
  • To properly match loan demands and offers;
  • To enable 100% secure transactions, etc.

P2P lending platforms directly connect borrowers with investors for getting online financial services. They are different on each side. The borrower is interested in obtaining credits in a fast-track manner whereas the lender wants to invest money wisely, receiving a generous return on investment (ROI). Both are looking for the most favorable terms and conditions for themselves. This is why P2P lending works differently than that you could have experienced 20 years ago.

How a P2P lending company works

Each P2P lending platform sets certain terms and conditions for both involved parties. Thus, it serves as an intermediary between potential borrowers and lenders. It can either be a P2P lending website or mobile application. In other words, it looks like a marketplace where users make specific transactions. In this case, users make lending transactions in the given type of online marketplace. 

In one of our articles “Setting Up an Online Marketplace: Quick Start with These Tips & Tricks”, we take all possible challenges into consideration and come up with practical solutions to each. So, if you get stuck at any stage of marketplace development, read on practical advice from market leaders.

How do p2p lending companies make money? These companies generate revenue in several ways — through interest rates, service fees, and charges. They offer investors a better investment opportunity to earn, and borrowers a faster and more convenient way to borrow money than those offered by traditional financial institutions. Peer-to-peer lending companies have a wide range of interest rates, which may depend on the creditworthiness of the applicant. In addition, they may charge both borrowers and investors, or only borrowers. For example, borrowers must pay upfront or listing fees, and investors – commission on interest received. 

Global P2P Lending

The List of Peer 2 Peer Lending Companies

To study the peer-to-peer lending industry as a whole, and show all the ins and outs of the lending platform development, we focused on the 5 main players in the world – Prosper Marketplace, Zopa, LendingClub, Peerform and Upstart.

  1. Prosper Marketplace

Prosper peer to peer lending company

This is one of the first peer-to-peer lending companies that appeared in America. It was founded in 2005 with the headquarters in San Francisco, CA. The primary aim is to increase the financial well-being of American citizens. To this date, they serve over 1 million people. Fixed-term loans are offered in the amount of from $2,000 to $40,000. Both individuals and institutions can access affordable loans through an online platform. At the same time, investors earn solid risk-adjusted returns. With over $17 billion of funded loans, Prosper Marketplace, Inc. reported a 13% increase in lending

Back in June 2016, the Prosper’s team worked on a website to enhance user experience. They made significant improvements both in the front-end and in the back-end of the platform. The focus is on the simple and intuitive use of the site. Some functions remain virtually unchanged. But the two main areas were entirely revised – an account dashboard and auto-invest setup. After logging into an account, users come upon a totally updated account dashboard. An overview page consists of the current distribution of loans, as well as the target distribution if auto-investment is enabled. The new Auto Invest option is directly connected with the account panel. As the company notes, now it’s four times faster to get loans at prosper.com. 

Since 2019, the company has introduced some updates. For example, they provided a new way to access the lending marketplace – through a mobile application for iOS and Android devices. Users are able to manage their investments and portfolios anytime and anywhere. 

Prosper is partnering with BBVA (a digital banking company) to launch an end-to-end digital solution for HELOC (Home Equity Line of Credit). As less paperwork is involved in the loan application form in this app, it saves consumers a great deal of time compared to traditional means of obtaining credit.

  1. Zopa

If the Prosper Marketplace was the first P2P lender in the United States, then Zopa was the first company to enter the UK peer-to-peer lending market. It was founded in 2005 to give people access to simpler and more beneficial loans and investments. For 15 years in business, they have allocated more than £5 billion to nearly 500,000 borrowers and raised £250 million for the same number of investors. Basically, their service helps customers relieve stress from money management. How do they do it? Through a peer-to-peer lending platform strong enough to meet growing demand. This is a web and mobile application based on transparency and trust. At Zopa, cybersecurity is ensured as technology advances because their customers trust very important personal and financial data.

They adhere to the highest standards and have been regulated by the FCA (Financial Conduct Authority) since 2014. In 2016, Zopa applied for a banking license to expand the range of financial products offered to consumers in the UK. According to its founders, it was supposed to be a different type of bank. And they achieved their goal. In 2018, the giant company with new fintech products received a full banking license due to Open Banking launched in the UK. This allows third-party developers to use open APIs to create applications and services within a financial institution. Zopa experts are confident that this provides not only the opening of competition in the banking sector but also better control. Customers gain control over their financial data and, in turn, over their money.

Thanks to a number of new innovative features, this company is focused on making people feel good about their money. Borrowing Power is Zopa’s newest tool to help manage money. This is an in-app tool that allows users to get the best loan rate and other personalized recommendations. 

New products include a fixed-term savings product protected by a financial services compensation scheme (FSCS), a credit card, and a cash management application. They pride themselves in doing things differently providing high technologies and exceptional customer services. They hire experts in product management, software development, UI/UX design, data science and machine learning. Cross-functional groups help create a fairer, more transparent and more profitable financial service in the world. It is technology and experience that underlies their growth and innovation. For that reason, this company has earned a reputation as an innovator in the market. 

  1. LendingClub

LendingClub p2p lending company

This American company came onto the peer-to-peer lending market in 2006 immediately after two previous pioneers – Prosper and Zopa. In 2006, it was founded in San Francisco, California. The team took another step forward in the alternative credit system – loan offers in the secondary market. This online peer to peer lender offers various personal loan options. Besides, LendingClub was the first peer-to-peer lending company that registered its offerings as securities with the Securities and Exchange Commission (SEC). For over 14 years in the fintech industry, the company has been recognized for its innovative ideas, leading-edge technology and business success.

How LendingClub Works

The company claims to have raised $50 billion in loans and has linked more than 3 million borrowers to investors through its online platform. This is a digital marketplace that directly connects investors and borrowers with limited intermediation. It is presented both on the web and on mobile devices – Android and iOS. Investors can search loan lists there and select the loans that they want to invest in. The choice is based on the information provided on the borrower, loan amount, loan level and loan purpose. LendingClub earns money by charging a commission for providing services to borrowers and investors for servicing.

Thanks to the latest technology and effective algorithms used to assess risks and detect fraud, the company provides users with fully automated loan approvals. This feature reduces the time and paperwork that exceed in traditional banks. Using effective big data technologies, the team was able to facilitate the matching of borrowers and investors on the platform. Special analytical systems make it easier for lenders to find loans that satisfy their individual interest in risk and return.

  1. Peerform

Peerform p2p lending company

This leading personal loan company was founded in 2010 by Wall Street executives – Mikael Rapaport, Meytal Benichou, Elie Galam. Thanks to their extensive expertise in the fintech sector, this team was able to accelerate its rapid development in the market. The key incentive to create this company was the reluctance or inability of traditional credit services to provide loans to individuals and small businesses. In this situation, experienced experts set the aims to

  • Offer proven investment opportunity selection;
  • Provide access to affordable loans and achieve attractive and steady returns;
  • Minimize overhead costs associated with traditional credit organizations;
  • Guarantee positive experience for borrowers.

Each of these points is easily accessible on the online lending website developed for Peerform. It is rich in functionality to satisfy all possible user needs – simple registration, loan listing and selection, quick verification, customization, etc. 

Primarily, this New York-based lending company acts as a marketplace where borrowers and investors cooperate. Loans reach up to $25,000 on the Peerform platform. Highly advanced algorithms used in Peerform Loan Analyzer allow matching investors with borrowers and securing funds based on effective creditworthiness criteria. These algorithms are constantly updated and improved. Instead of standard filters, empirical methods are used to accurately calculate consumer credit risk. With this tool, a company can register additional borrowers with more accurate credit ratings than other loan platforms. As a result, they can serve those who cannot apply for bank loans. 

Peerform is actively addressing the challenges existing in the P2P lending industry. For example, they implemented a Fraud Prevention System (FPS). Due to state-of-the-art technologies, this system helps detect and prevent fraud on the platform. The team uses methods such as knowledge-based authentication (KBA), behavioral analytics, and other types of specialized software to expand Peerform’s capabilities in this direction.

Peerform is a subsidiary of Versara Lending, which acquired Peerform on November 7, 2016.

  1. Upstart

Upstart one of top p2p lending companies

This company is considered to be innovative as it operates on the AI-based lending platform. 70% of loans are fully automated and processed almost instantly at Upstart – from initial loan demand or offer to final funding. As of 2020, $6 billion was received in loans. It was founded by two former Google employees – Anna Counselman and Dave Girouard, as well as Paul Gu, who was also well known as one of Thiel’s 20 under 20 Fellows. The experienced team said that thanks to an AI platform developed specifically for Upstart, the number of approvals is higher and the percentage of losses is lower. What is the secret outside of artificial intelligence? In fact, Upstart goes beyond the FICO score and improves access to credit for most consumers along with the high performance of the lending site. 

Online lending is an extremely competitive sector of the entire fintech industry. Mainly it is driven by young applicants who require instant solutions from automated software systems with dynamic data processing. Using efficient machine learning (ML) algorithms, it is constantly being improved and optimized in accordance with daily data obtained from various sources. Data on loans are agreed from the borrower to the investor; it is protected and unchangeable. The latest technologies in Data Science, AI & ML allow you to make informed credit decisions, automate verification processes, and prevent fraud in the system. In other words, they are able to provide a seamless user experience.

Upstart positions itself as a reliable fintech partner for such organizations as First National Bank of Omaha, First Federal Bank of Kansas City, etc. Upstart is introduced as the first SaaS (Software-as-a-Service) lending platform. The team seeks to collaborate with financial institutions, not compete with them. This is not just software – it is a turnkey solution that provides all the necessary functions for successful lending – effective document management and proper data verification, fraud and error prevention and customer service (optionally), loan servicing and collection. All their solutions are powered by AI, Data Science, cybersecurity best practices. 

Upstart statistics

Given from the official Upstart website

What is remarkable about this system is that it is delivered through the cloud. A cloud-based loan platform can guarantee better results – easier platform maintenance, faster loan processing, enterprise-class security, and others.

How to Set Up P2P Lending Projects: 5 Effective Steps

The current stage of development of the peer-to-peer lending market is characterized by its rapid growth. In 2020, there was an increase in the volume and number of online transactions, as well as an expansion of the range of services that can be carried out using online platforms.

P2P Lending Platforms

Source: Statista – Digital Market Outlook 2020: Alternative Lending Worldwide; P2P Lending Platforms of the World (p2pmarketdata.com)

This multi-billion dollar industry brings together borrowers and lenders on a technologically sophisticated platform. So, it’s worth starting with the development of a P2P lending platform – whether it’s a website or a mobile application. Nevertheless, as practice shows, most successful companies start with the development of a multifunctional web application and then switch to the mobile version.

You can create your own P2P lending platform using your own resources or use the technological experience of a software development partner like Mangosoft. If you are still looking for a technical development partner, here are a few practical steps that are helpful for ultimate success in this endeavor:

  1. Communicate closely with a representative(s) of a software development company. It is recommended to find out all the details of further cooperation – contact methods, engagement models, team size and their rates, an estimate of final project costs, etc. At Mangosoft, you can agree on any suitable outsourcing model for you – whether it is a dedicated team, fixed-price, or time-and-material.
  2. Conduct a business analysis of the software product in question. You cannot launch a P2P lending platform without consulting with experts in this field. For example, Mangosoft in any case appoints a business analyst (BA) on the project to guarantee the customer accurate results. As a rule, BAs participate in the discovery phase to create technical documentation and requirement specifications for developers. But our BA conducts the entire project until its completion. The goal is to correctly convey to the developers all the business needs that may arise at any stage of development. In this way, Mangosoft guarantees flexibility and adaptability to dynamic conditions or requirements in the market. In addition, it is really useful for those who are not tech-savvy. They do not need to understand technical problems – everything is solved by real professionals.
  3. Keep track of how your future online business is developing. Through constant communication with a partner and regular progress updates, you can be informed about project outcomes. At Mangosoft, the entire workflow is usually built in accordance with the Scrum methodology. This approach helps us fulfill the planned tasks in the sprint (two weeks) and give a report on the work done. Most of our customers consider this an effective basis for cooperation.
  4. Don’t neglect QA services. It is better not to market a product without rigorous testing (manual or automated). It is especially advisable to test the software if a lot is at stake – usability, reliability, reputation, trust and so on. Keep in mind that our team is ready to provide software testing and QA services by high standards.
  5. Ask for support and maintenance service, or more development if necessary. After going through all the stages of custom software development, you become the owner of the product. So, use it in the fintech industry for your own benefits. If you need some help in further product development or maintenance, our doors are open to you as well. 

Wrapping Up

FinTech is ahead of the game. As you can see, the technology provides the entire lending process. As a result, all the operations on P2P lending platforms are less resource-intensive than they are in traditional banking systems. We believe that the latest software technologies (AI & ML, predictive data analytics, cloud computing) will transform all areas of financial services, including lending. Over a decade will pass, and we will interact differently. The peer-to-peer lending industry is an exciting place that can grow rapidly, not only in the United States but also far beyond.

Given the pace of changes in technology, partnerships with reliable software tech specialists will be critical in the coming years. Mangosoft is already a technical partner of global fintech companies. Maybe now it’s your turn to seek qualified help with your dream project. Contact us and get a free consultation on any project that you plan to start soon.