Peer-to-peer (P2P) lending platforms like Zopa and Prosper allow individuals to borrow and lend money without going through a traditional bank. Lenders choose loans to fund and set their own interest rates. Borrowers receive loan amounts and pay monthly payments directly to their lenders. P2P lending offers competitive rates for borrowers and high returns for lenders. However, risks include lack of regulation, no collateral from borrowers, and potential platform failures reducing confidence. For P2P lending to grow, increased awareness, regulation, and technology are needed to build trust and better screening while expanding into new loan categories could also help.

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. How P2P Lending Works
Source: Infosys Research

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. BUSINESS MODEL OF PROSPER
Borrowers & Lenders join
Prosper.com 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. 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. 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. 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. 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. THANK YOU