Fintech has disrupted the financial service sectors in many countries in a good way. It provides several advantages to both consumers and businesses. Fintech makes it easy to pay bills and transfer money to bank accounts. Besides this, it helps people living in rural areas with the option of performing financial transactions and services that were very difficult to do in the past. These are just a few Fintech advantages, the list is endless.

Having said that, one of its business models “Peer-to-Peer lending” has achieved success in overseas markets like UK and US. This lending model allows borrowers to obtain loans directly from other individuals bypassing the financial institutions which act as middlemen. The model’s success overseas is because the borrowers were able to avoid the high margins charged by the banks using the peer-to-peer lending model which was not possible with the traditional lending model.

In Australia, the lending model is in its nascent stage and has got a lot of attention due to the success it achieved overseas. Since the model is starting to spread its wings in the Australian marketplace, this is the best time for fintech startups operating in the lending space to learn lessons from overseas experience.

Here are a few points put across by Bahaa Abdul Hussein that helps us to learn from the overseas experience.

Power of Institutional Investors

Institutional investors in the lending space have the power to provide the needed liquidity to lending platforms quickly. In the US, a lending platform was able to disburse loans of around a billion dollars in a quarter to its borrowers which couldn’t be possible without the help of institutional investors. So, lending startups need to associate with a few key institutional investors from day one so that the lenders can have enough liquidity in time to disburse loans quickly to borrowers.

Make the Lending Platforms Easy To Use

Retail investors now prefer automated investment mechanisms to the conventional mechanism that they used to practice which was selecting the loan individually and then investing. They now desire lending platforms to provide easy-to-use tools that will make the process of investment easy.

Innovate Risk Assessment Process

Traditional lenders had a difficult time assessing the risk of a loan. They couldn’t assess the risk accurately. In America, a few Fintech lending companies had taken a different approach to assessing the risk. They assessed students who required loans by taking into account the education data that helped them in assessing the risk accurately. So, this experience shows that innovative ways of risk assessment have to be practiced.

Collaborate with Banks

The other experience that we can derive is that traditional creditors like banks are not enemies of lending platforms. To exist for a longer period of time, the marketplace lending platforms should collaborate with the existing traditional credit providers.

Thank you for your interest in Bahaa Abdul Hussein blogs. For more stories, please stay tuned to www.bahaaabdulhussein.com