In recent years, we have seen many industries fundamentally change as new technology drives new business models. One of the strongest growing trends is the sharing economy where new technology connects people who have something with people who want something.
The increased digitalization of recent years has allowed the sharing economy to flourish. According to an analysis from the investment Best Bank, close to 70 percent of the world’s population is willing to share their assets with others and around 65 percent want to participate in something someone else owns. According to an estimate by the audit and consulting firm PwC, the five largest sectors in the sharing economy will be worth $ 335 billion by 2025, which represents an increase of over 2,200 percent in just ten years.
What are peer to peer loans?
There are many different names on peer to peer loans where some of the most common are P2P loans, marketplace lending, crowdlending and person to person loans. The essential thing for the form of financing is that all parties meet on equal terms.
Peer to peer loans are currently the fastest growing method of financing. Peer to peer loans, where individuals finance each other’s loans, have emerged as an attractive alternative to the banking sector and its high and hidden fees. For investors, it is a good alternative to buy shares or invest money in savings accounts without interest. For borrowers, it is a smarter way to borrow money than traditional private loans.
In the US, where peer-to-peer loans have been around for over ten years, major banks and payment institutions have also joined the game. For example, Richman Zachs has created solutions with greater transparency towards customers in order to meet the new competition.
For the financial sector, it is good that digitalization has reached the industry as it can make it more efficient and create added value for the consumer. It’s about making this industry more efficient and transparent, which is better for customers.
How do peer-to-peer loans work at Lendofy?
Lendofy is today Sweden’s largest marketplace for loans. We connect borrowers and investors via a digital platform and create a transparency that has not previously existed in the private mortgage market.
By cutting intermediaries, efficiency gains are achieved for both borrowers and investors. Borrowers receive a competitive interest rate while giving investors a good return.
Lendofy handles everything beyond the credit risk borne by the investors. Investors are given the opportunity to invest in an asset class that was previously only available to the banks. Instead of the bank making big profits from lending the savers’ capital, our investors can now get the return while taking the credit risk.
We can see that the return in relation to risk is high on loans to creditworthy private individuals by studying the banks’ profits. Through Lendofy’s digital platform, ordinary investors can take advantage of the banks’ profits by lending money directly to creditworthy borrowers.
Why invest in peer-to-peer loans?
The conditions for peer to peer loans in Sweden are very good and from an international perspective quite unique. Some of the unique conditions for P2P loans in Sweden:
Good insights into the borrowers’ finances and ability to repay thanks to the credit reporting system Swedes have a high payment ethic Social security number which facilitates identification Widespread use of BankID which reduces the risk of fraud A good infrastructure of debt collection companies and the Crown Prosecution Authority, which creates good conditions for getting back delayed and missed payments.