P2P / Social Lending Business and Same Business Aggregators

P2P Lending marketplaces are emerging all over the world and are presently one of the hottest sectors. This innovation has now impacted various other related categories where transactions between individuals are probable and have a need to structure for the comfort, security and credibility of the innovation. 


Earlier we know that sites like Bank Bazaar, Policy Bazaar, Paisabazaar in India have emerged, scaled and today operate by providing a lead generation engine to the service providers be it Banks, NBFCs, Credit Card companies, Insurance companies etc. either through lead aggregation and/or through tech interface enabling these institutions to quickly be available online without having to reinvent the wheel themselves. Consequently their revenue model includes advertising revenue, lead aggregation revenue and tech integration revenue. 


The reason for the success of these ventures is evident and backed with more than adequate venture funding. Most of these ventures are here to stay although the backend institutions are wanting to get into lead generation themselves for better control. Moreover these companies have databases in the financial space which is further monetized through customized programs to selected marketers. 


On the other hand P2P / Social lending marketplaces are different and can be classified as Alternate Finance and need to think and operate like traditional financial institutions similar to Banks and NBFCs albeit in a very different way. These platforms or companies have to pay the same attention to risk, underwriting, credit verification & appraisal, collection processes, KYC, default management but do it using Technology, Machine Learning Algorithms, Tech intervention in traditional offline processes and also need to build, sustain and manage an eco system in the alternate finance space. These marketplaces have to build credibility among their user base, offer better rates to all participants on the platform, offer a whole host of decision making tools, intelligence in appraisal and monitoring and build expertise of a different kind but that which delivers the same results to the participants on their platform. This entails an understanding of the whole end-to-end process and building the expertise at a fraction of the cost. 

Where this line gets blurred is when platforms seemingly appear to do lending while actually they are pushing leads to traditional institutions wherein the lending is done by the institution and there is very little value add in terms of providing lending expertise to these institutions. This is an intermediation and not disruption and the distinction needs to be understood at all levels. The opportunity to scale into a Lending Club is not very high for aggregators, even intermediating aggregators whereas the position of an Indian “ Lending Club, Zopa or Prosper” is vacant and will depend on who among the existing players get the entire ecosystem right and not just disbursals.