Many have already heard their inner voice asking ‘what exactly is peer-to-peer lending?’ Well, let’s clarify a few things all brokers should be interested to know. Let’s start with a few key elements, then take a look at if, why or where it fits into your business as a mortgage or finance broker.
Maybe a better description of peer-to-peer lending is ‘marketplace’ lending. It’s the matching of borrowers to private lenders. In essence, these platforms, typically a website or an app, are designed to cut out the major banks, and answer the changing needs and demands of the borrowers and investors.
In today’s society, consumers want a number of elements in their buying experience. Speedy approval time frame, easy application process, flexibility and features, and low fees are predominantly the biggest motivators in our modern marketplace.
The peer-to-peer platforms are listening to both the customers as well as the brokers. Some lending platforms are achieving paperless approvals and money in the customers’ bank account within 24 hours and, in some cases, the same day. The application and verification processes have been heavily streamlined and simplified, as have the terms and conditions of the loans. They’re undercutting the banks and slashing fees and charges across the board. Solve a problem in the marketplace and you’ll do great business. It seems this is exactly what P2P platforms have achieved.
Led by the now generation and Millennials, customers are less inclined to accept going through the lengthy process of paper-based applications. They will even go as far as pay a higher interest rate in exchange for quick money, easy access, and a fancy and simple app on their mobile phone. It’s no wonder the major banks are taking this movement seriously and are throwing millions of dollars in the direction of fintechs, apps and peer-to-peer. No one wants to risk losing a big chunk of market share.
While we’re in the middle of a financial services evolution of technology, diversification and consolidation, there is a place for mortgage brokers within this space. We’re getting used to the value-add proposition of adding insurance and commercial loans to our quiver, aided by our aggregators and a little industry regulatory push, but there’s so much more you can offer and assist your clients with, including but not limited to personal loans, business finance and peer-to-peer platforms. If the client isn’t buying these from you, chances are they are buying them from someone else. This is costing you money.
Which products and services you offer your clients will greatly depend on your target market and customer profile, the size and depth of your team and the ease with which you can access, educate and sell these products and services. As many of our customers are interested in speed, ease, flexibility and costs, so are we. These are also prime factors governing whether you will or won’t add some or many of the value-added products and services to your suite. As we’ve heard time and time again, time is money.