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Banking without banks group 1


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Banking without banks group 1

  1. 1. BANKING WITHOUT BANKS PEER-TO-PEER LENDING Group 1 Aakash Kulkarni [MGBSEP13IBWM001] Aishwarye Pandey [MGBSEP13CMM028] Kanika Bansal [MGBSEP13CMM039] Nishant Menda [MGBSEP13IBWM017] Ritika Shetty [MGBSEP13CMM047]
  2. 2. How P2P Lending Works Source: Infosys Research
  3. 3. BUSINESS MODEL OF ZOPA Borrowers and Lenders join Zopa, undergo identity check and credit-rating (A+ to C) Borrowers repay monthly by direct debt to their accounts Lenders choose amount, interest rate, loan duration and borrowers with specific credit rating Lenders transfer funds to Zopa’s Account Money is made available to the borrowers from 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 Source: Infosys Research
  4. 4. BUSINESS MODEL OF PROSPER Borrowers & Lenders join and link their bank accounts with Prospers account During repayment Prosper debits money from borrower’s account and credits to lenders account on pro-rata basis 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 Borrower is offered loan at the lowest bid rate Home ownership, Credit history debt-to-income information about borrower Source: Infosys Research
  5. 5. SWOT ANALYSIS OF P2P LENDING PLATFORMS Strengths Offers a high rate of return to lenders Offers competitive rates to borrowers Lenders locked in for loan period Opportunities Insuring lenders in case of loan defaults Development of superior screening of borrowers Regulation by authorities like FCA would increase trust Weakness Lack of awareness Not fully regulated No collateral required from borrowers, increases risk of default Can cater to only smaller loan amounts Threats Risk of ill-run platforms collapsing, reducing confidence in whole industry Acquisition by traditional banks Legal barriers for crossborder P2P
  6. 6. 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 Legal • Lower carbon footprint as compared to traditional banks • Pacts between Govt. of different countries to promote cross-border lending and borrowing
  7. 7. PORTER'S 5 FORCES OF P2P LENDING PLATFORMS Threat of Substitutes - HIGH Other NBFCs Competitive rates by traditional banks Shadow Banking Bargaining Power of Suppliers – MODERATE Other options for investment available Best returns on investment available from P2P platforms Competitive Rivalry – HIGH Many existing players offering similar rates and services Threat of New Entrants – MODERATE Easy to duplicate business model Difficult for new players to attract lenders Bargaining Power of Buyers – MODERATE Most affordable interest rates Lower transaction fees than banks Loan limit
  8. 8. 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
  9. 9. THANK YOU