04/07/2019 How to Build a Peer-to-Peer (P2P) Lending Platform and Software - Merehead

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How to Build a Peer-to-Peer (P2P) Lending Platform

and Software

According to estimates by the consulting company PwC, the P2P lending

industry will grow to $150 billion by 2025. In this article, you will learn how
to get a share of this rapidly growing market by building your own peer-to-
peer lending platform. What...

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How to Build a Peer-to-Peer (P2P) Lending Platform and Software (https://merehead.com/blog/how-build-p2p-lending-platform/)
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04/07/2019 How to Build a Peer-to-Peer (P2P) Lending Platform and Software - Merehead

May 11, 2019

 According to estimates by the consulting company PwC (https://www.pwc.com/us/en/consumer-

nance/publications/assets/peer-to-peer-lending.pdf), the P2P lending industry will grow to $150

billion by 2025. In this article, you will learn how to get a share of this rapidly growing market by
(https://twitter.com/share?
url=https://merehead.com/blog/how-
building your own peer-to-peer lending platform.
build-
p2p-
lending-
platform/&text=How WHAT IS P2P LENDING
to
Build
a This is a money lending mechanism, where creditors and borrowers are equal parties (individuals
Peer-
to- and / or companies) and the process is carried out without the participation of intermediaries in
Peer
the form of banks, credit brokers and other traditional nancial institutions. In most cases,
(P2P)
Lending such relationships are built on the Internet at special sites - P2P platforms.
Platform
and
Software
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u=https://merehead.com/blog/how-
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p2p-
lending-
platform/)

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04/07/2019 How to Build a Peer-to-Peer (P2P) Lending Platform and Software - Merehead


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mini=true&url=https://merehead.com/blog/how-
build-
p2p-
lending-
platform/&title=How
to
Build
a
Peer-
to-
Peer
(P2P)
Lending
Platform
and
Software
-
Merehead)

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url=https://merehead.com/blog/how-
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a
Top Peer Crediting Sites in the USA (August 2016 - July 2017). Source of the data: statista
Peer-
to- (https://www.statista.com/statistics/763623/p2p-lending-websites-us-by-visits/)
Peer
(P2P)
Lending Without intermediaries, the interest rate is lower and the investor’s pro t is greater. The fact is that
Platform
maintaining a bank is an expensive pleasure. It is necessary to rent or purchase premises, sta ,
and
Software) buy computer equipment and special software. And follow all safety rules.

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Traditional lending model with a bank. Source of the data: fundingknight

(https://fundingknight.wordpress.com/2012/05/03/how-peer-to-peer-lending-works/).

Multiply these expenses by several branches, and you will understand why in the same bank the
credit rate can be at the level of 10%, and the deposit rate - 2%. The bank eats up most of the
pro ts of investors.

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04/07/2019 How to Build a Peer-to-Peer (P2P) Lending Platform and Software - Merehead

P2P Lending Model. Source of the data: fundingknight (https://fundingknight.wordpress.com/2012/05/03/how-peer-

to-peer-lending-works/).

In peer-to-peer lending does not need to take into account the cost of banking real estate, sta
salaries and expensive equipment. Therefore, the loan rate can be at the level of 10%, and the
investor's bene t - 8%. The remaining 2% will leave the P2P platform.

Such lending works in a simple way:

1. People register on the P2P platform as a borrower or lender (investor).
2. The borrower submits an application for a loan, specifying the amount, terms of the loan and
brief information about himself.
3. The platform assesses the risk, determines the credit rating and sets the appropriate interest

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rate. This is done by oracles (people or organizations hired from outside) and / or special
algorithms.
4. The application goes to the total pool that lenders view.
5. If the loan conditions are suitable for any of the lenders, a loan agreement is made.

Do you want to build a project? Contact us and we'll help

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you.

The only di culty is the P2P platform itself. The site should be comfortable, reliable, secure and
support a large number of languages (this will increase the reach of the audience). It is di cult to
create such a platform, but if you approach this wisely, you will have every chance of success.

HOW TO BUILD A PEER-TO-PEER LENDING PLATFORM

Step 1: Decide on a business registration form

When choosing a form of registration of a legal entity, such moments should be taken into
account:
- Registration as a corporation or a limited liability company will protect against creditors in the
event of bankruptcy or force majeure.
- Corporations impose signi cantly more requirements than LLCs, including requirements for
accounting and tax reporting. In addition, corporations must hold shareholder meetings at regular
intervals.
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- Di erent forms of registration imply di erent tax statuses, but an LLC can choose to pay taxes as
an LLC or as a corporation.
- The corporation is obliged to distribute pro ts and losses according to the share of ownership of
each participant. In LLC distribution occurs according to the operating agreement, the terms of
which are determined by the participants of the company.

Step 2: Register the company name

Usually, a company (trademark) must be registered in the state in which the business will operate.
For P2P platforms, this is the main o ce location. At this stage, you need to take into account such
moments:
- The name should be free, which can be checked on the website of the United States Patent and
Trademark O ce (https://www.uspto.gov/trademarks-application-process/search-trademark-
database#heading-1).
- The brand name does not have to match the domain name.
- Registration rules may vary widely by state.
- It is desirable that by the name of the company people can understand the scope of activities and
the registration form (this is mandatory). For example, P2P Lending, Inc., if it is a corporation, or
P2P Lending, LLC, if it is a limited liability company.

Step 3: Register the platform domain

Domain is your website address. It should not be very long and easy to read. Abbreviations are
welcome if this is an abbreviated name of the brand. The important points at this stage are:
- Domain, as well as company name, must be unique. Check whether a domain is free or not can
be on many sites that are easy to nd using Google.

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- Domain registration requires money. As a rule, these are small amounts - up to $20, but there
may be exceptions depending on the domain zone - $ 100 or more.
- When registering a domain, you do not get it into the property, but rent it.

Step 4: Create a team

This is the main success factor of any project, so the choice of the team must be approached with
the utmost seriousness. To do this, follow these recommendations:
- Sta need to be sta ed with people who know how to operate a website and are experts in
nance, nancial law, marketing, or advertising.
- In addition, we need people with experience in the banking sector who understand how to build
a credit business and assess credit risks.
- You need to hire people with a long-term focus, that is, immediately o er long-term contracts and
social packages with accumulating bonuses.

If possible, it is better to lure employees from other companies, preferably successful ones. Such
people have the experience, the necessary skills and understanding of the task. In addition, so you
a little bit, but shake the position of competitors.

Step 5: Raise money for start-up capital

In addition to the content of the site and other operating expenses at the start, you will need
money to issue rst loans. Do not expect that P2P investors will immediately come to your site. You
can collect money in the following ways:
- Primary Coin O er (ICO / STO) (https://merehead.com/blog/how-to-launch-security-token-
o ering-sto/). You can create tokens that will bring dividend pro ts or reduce commissions.
- Attracting venture capital. To do this, you need to make a detailed business plan

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(https://merehead.com/blog/bitcoin-startup-business-plan/) and reach out to business angels -

people who invest a lot of money in exchange for a share in the business.
- Bank loan. Need a solid pledge.

The amount of startup capital depends on the cost of developing the platform, team size and
marketing strategy. The price of creating a platform for P2P lending uctuates around $10–200
thousand. It will take the same amount on marketing promotion (https://merehead.com/blog/ico-
marketing-plan-strategy-budget-consulting/), if you use bounty campaigns - a little less.

Step 6: Develop a P2P Platform

The platform can be created from scratch by hiring a blockchain programming team
(https://merehead.com/blog/how-to- nd-and-hire-blockchain-developers/) or by outsourcing the
development (https://merehead.com/blog/how-to-choose-a-blockchain-app-development-
company/). However, it is better to use solutions like White Label — ready-to-use products
(https://merehead.com/blog/white-label-crypto-exchange-vs-open-source-crypto-exchange/) that
can be customized. When using White Label, it is important to remember such things:
- These are sample solutions that are not suitable for unique credit products. White Label can
integrate your own credit scenarios, but this will require hiring the appropriate specialists.
- It is better to use open source white label. Such products contain fewer errors and are more
trusted by users.

The development time of the P2P platform from scratch is from 4 to 12 months. With White Label,
this time can be cut in three. Cost will also decrease.

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Step 7: Create a web portal

When creating a site for peer lending, it is important to consider such moments:
- The portal must be integrated with the maximum number of payment gateways.
- The site interface should be intuitive and support several major languages.
- Some White Labels include basic website design. Use it only as a draft. Your site design must be
unique and recognizable.

Step 8: Testing the site and platform

Each custom platform usage scenario needs to be tested and ensure that everything works as it
should. In this case, most of all attention should be paid to:
- Security. The connection with the user and payment gateways must be encrypted, personal data
is hidden behind seven seals, and nancial gateways are closed for 1000 and 1 lock.
- Usability. The user at the rst transition to the site must understand how to register, apply for a
loan or invest money.
- Performance. You can nd out the speed of loading a site on di erent devices using the
PageSpeed Insights (https://developers.google.com/speed/pagespeed/insights/) service. There are
also tools to improve portal performance.

Step 9: Platform Launch

Before launching the site, you need to conduct a marketing campaign, o ering rst users -
borrowers and investors - discounts, lower (or higher for investors) interest rates, more loyal
conditions for granting a loan and the like. But you need to remember about:
- Scammers who want to get a loan and disappear. There are a lot of such people at the start, as

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there is a chance to nd loopholes in the risk assessment or user identi cation algorithm.
- Hackers (https://merehead.com/blog/how-hack-cryptocurrency-exchange/) who can launch
phishing resources, try to hack a website or launch a DDoS attack (ordered by competitors).

Step 10: Starting the Technical Support Service

Despite all the precautions, testing and debugging, the platform after launch will almost
guaranteed to contain errors and bugs. And most likely, they will not be detected by full-time
specialists, but by users. Therefore, it is important to quickly start a support service that will work
with the maximum load in the rst few months.
Thanks to this will succeed:
- Catch and destroy most of the errors and bugs.
- Understand what was missed at the time of development, and promptly add missing features,
elements or instructions.
- Get feedback from users and understand what needs to be improved to make the platform more
convenient and understandable.

HOW TO COMPLY WITH GOVERNMENT REGULATIONS

Hire a lawyer. The lending market is highly regulated, so a lawyer in the state is a prerequisite for
the work of any organization that is engaged in business in this segment. You need to hire a lawyer
before you:
- draw up standard loan agreements;
- sign the rst loan and / or investment agreement.

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Work with banking professionals. A startup team must have at least one person with education
and experience in the banking sector. It is needed to ensure the relevance of credit products and
the compliance of procedures with industry standards. In particular, it is necessary to ensure
compliance with the Law on Electronic Transfer of Funds, the Law on Private Credit Reporting and
the Law on Bank Secrets.

Establish anti-discrimination policy. Federal consumer credit laws prohibit the use of
discriminatory lending practices (not all, there are exceptions).

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Example of indirect discrimination. Source of the image: topsimages (https://www.topsimages.com/images/indirect-

discrimination-4c.html)

One should also be aware of indirect discrimination, when seemingly neutral on paper criteria for
selecting borrowers in practice put representatives of a certain group of people at a disadvantage
compared to other groups.

Make a comprehensive loan agreement. The agreement must comply with the “Truth in
Lending” Law, which establishes uniform methods for disclosing credit terms:
- All terms should be set forth and disclosed in words that all parties to the transaction will
understand. Examples include traditional bank credit agreements.
- The contract must contain not only credit conditions, but also nes, late fees, partial payments or
refusal (impossibility) to repay the loan.

Remember local and international laws. In some states there may be additional requirements
for organizations that are engaged in peer-to-peer lending. International laws are mainly aimed at
combating money laundering and the nancing of terrorism, sometimes with the withdrawal of
money in o shore zones.

Remember the cryptocurrency laws. If you raised money with ICO / STO
(https://merehead.com/blog/di erence-sto-ico/), you need to register with the SEC. If digital assets
are used only as means of payment, you need to remember that the growth of cryptocurrency
quotes (https://merehead.com/blog/how-create-cryptocurrency-ethereum-token/) can lead to the
formation of investment income, from which you need to pay taxes.

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WHICH WHITE LABEL CAN BE USED TO CREATE P2P LENDING

PLATFORMS

Rebuilding Society/White Label Crowd. Rebuilding Society - tools for launching P2P lending
platforms. White Label Crowdfunding - a subsidiary that simpli es the creation of new P2P sites.

Zidisha’s Open Source Platform. An open source platform that specializes in issuing microloans
to businesses in developing countries.

Cloud Lending Solutions. It o ers investor management, integration of credit bureaus and loan
split. Cloud Lending Solution software will also help with back-o ce processes (creation,
underwriting, nancing and servicing market loans).

Agriya’s Lending Software. Web development company with head o ce in India. Specializes in
software for creating peer-to-peer lending sites and other types of crowdfunding platforms.

Strategic Information Technology. Includes several software products that can be integrated into
the loan platform: retail banking software, lending tools, debt collection and investment
functionality.

Madiston. Allows you to customize your own credit model, conduct reverse auctions, as well as
automate lending or bidding.

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MyAzimia. O ers payment integration, credit management, reporting, and more. It is

distinguished by the presence of simple and visual video tutorials on creating peer-to-peer credit
platforms.

Crowd Valley. Platform for creating sites of P2P-crediting with a “white label”. The software
includes a customizable module for issuing loans, application forms, electronic signature functions,
matching algorithms for borrowers and lenders, and much more.

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