BANKING WITHOUT BANKS

PEER-TO-PEER LENDING

Group 1

Aakash Kulkarni [MGBSEP13IBWM001]

Aishwarye Pandey [MGBSEP13CMM028]

Kanika Bansal [MGBSEP13CMM039]

Nishant Menda [MGBSEP13IBWM017]

Ritika Shetty [MGBSEP13CMM047]

How P2P Lending Works

Source: Infosys Research

BUSINESS MODEL OF ZOPA

Borrowers and Lenders join Zopa, undergo identity

check and credit-rating (A+ to C)

Lenders choose amount, interest rate, loan duration and borrowers with specific

credit rating

Lenders transfer funds to Zopa’s Account

Borrowers select from the rates offered to them,

money is taken from each lender in rank order until

the full amount is matched

Money is made available to the borrowers from Zopa’s

account

Source: Infosys Research

BUSINESS MODEL OF PROSPER

Borrowers & Lenders join Prosper.com and

link their bank accounts with Prospers

account

Borrowers post credit listing along with the reason for loan and

max interest rate

Lenders bid on credit listings indicating a

minimum rate either for entire amount or

part of the loan

Home ownership, Credit history debt-to-

income information about borrower

Borrower is offered loan at the lowest bid

rate

During repayment Prosper debits money

from borrower’s account and credits to

lenders account on pro-rata basis

Source: Infosys Research

StrengthsOffers a high rate of return to lendersOffers competitive rates to borrowersLenders locked in for loan period

WeaknessLack of awareness Not fully regulatedNo collateral required from borrowers, increases risk of defaultCan cater to only smaller loan amounts

OpportunitiesInsuring lenders in case of loan defaultsDevelopment of superior screening of borrowersRegulation by authorities like FCA would increase trust

ThreatsRisk of ill-run platforms collapsing, reducing confidence in whole industryAcquisition by traditional banksLegal barriers for cross-border P2P

SWOT ANALYSIS OF P2P LENDING PLATFORMS

PESTEL ANALYSIS OF P2P LENDING PLATFORMS

Political•Intervention of Govt. in the P2P process•Unfavorable tax policies•Trade restrictions•Political stability•Budget restrictions

Economic

•Confining with BASEL norms

Social•Increased acceptance of e-Commerce•Increase in demand for affordable personal loans due to changing lifestyles

Technological

•Robust database to maintain history of borrowers and lenders

Environmental

•Lower carbon footprint as compared to traditional banks

Legal•Pacts between Govt. of different countries to promote cross-border lending and borrowing

PORTER'S 5 FORCES OF P2P LENDING PLATFORMS

Competitive Rivalry – HIGHMany existing

players offering similar rates and services

Threat of Substitutes - HIGH

Other NBFCsCompetitive rates

by traditional banks

Shadow Banking

Bargaining Power of Buyers – MODERATE

Most affordable interest rates

Lower transaction fees than banks

Loan limit

Threat of New Entrants – MODERATE

Easy to duplicate business modelDifficult for new

players to attract lenders

Bargaining Power of Suppliers – MODERATE

Other options for investment available

Best returns on investment

available from P2P platforms

CONCLUSION

• Improving awareness through increased marketing can help attract more lenders and borrowers

• Regulation will help build trust in the platforms

• Improvements in technology will lead to more advanced screening and greater ease of use

• Could expand to other categories of loans like education, medical, etc.

• Banks could partner with P2P lending platforms to provide credit assessment, transaction processing and increase credibility of the platforms

THANK YOU