Blockchain to Alter Peer-to-Peer Lending IndustryAugust 24, 2018
P2P lending removes the middlemen – conventional banks – and connects lenders along with small businesses and individual borrowers. After the first Peer-to-Peer lending platform launched in the United Kingdom in 2005, direct lending has grown massively. It takes the total number of loans from £1.5 million to £3.5 billion in 2016, and that is only in the United Kingdom.
It’s an appealing investment alternative for highly-efficient smaller investors and savers. Even though the capital of the lender is at risk, the returns can go as high as 13%. It is also worth stating that the longer the loan duration is, the better the returns. Even those short-term consumers can average six percent per year.
What is Peer-to-Peer Crypto Lending?
Peer-to-peer crypto lending works similarly as conventional P2P lending through removing banks and connecting borrowers and investors directly. The only exception here is that loans are issued in crypto. Ether and Bitcoin are the two most sought-after digital currencies utilized to fund p2p loans. The cryptocurrency sector has been growing massively over the past few years.
If the trend remains to climb, another lending can grow roots quickly across the globe. It can reach such corners of the globe where banks couldn’t venture.
The Advantage of Blockchain Technology in Peer-to-Peer Lending Sector
The blockchain tech has countless advantages. The perfect way to showcase them is to search at the shortcomings of the existing transaction systems.
If you look from a historical point of view, the payment system has come a very long way. It starts with instruments of trust like credit card systems and paper money for mobile payments and contactless. Still, a lot of business transactions remain costly, vulnerable and inefficient today. Most are experiencing different limitations.
Some of these are can be found below:
- The risk of duplication is very high. The necessity for a third-party validation fuel the inefficiencies.
- The time between settlement and transaction can be long.
- Cash is a hugely inefficient form of payment. It limits people to local transactions and moderately small amounts.
- 39% of the globe’s population don’t have access to a bank account. They need to utilize alternative payment methods to perform transactions.
Often, utilizing blockchain technology refers to fixing a data issue. It not just has the potential to allow 2.5 billion people around the globe who are unbanked to access digital currencies. It also streamlines financial services and eliminates the necessity for a third-party in an array of transactions which go way beyond finance.
For example, XinFin is a blockchain technology based in Singapore that focuses on global finance and trade. The focus of the platform is to liaise along with government and allow lowest cost infrastructure financing to help connect the wide infrastructure deficit which worldwide economy has.
XinFin (XDCE) has established a secure, highly scalable, commercial and permissioned grade blockchain architecture which combines the best features of Ethereum, Quorum, and Ripple. XDC01 protocol powers XinFin wherein underlying XDC tokens could be traded against FIAT currencies and other cryptocurrencies.