Peer to peer (P2P) lending represents a new and potentially disruptive force in consumer lending and investment. It offers not just the promise of a better experience for borrowers, but a more efficient platform for investors as well. Its recognition and approval by various regulators around the world legitimizes the fledgling industry.
Consumer lending has typically fallen into two camps: a traditional face to face interview (coupled with forms to fill out at an office) or highly automated credit card lending. Both methods are biased towards institutional needs and are coupled with high overhead. In the case of face to face lending, there are high labour and processing costs. In the case of credit cards, high interest rates are charged to compensate for inefficiencies, those who cannot pay, and to cover fraudulent activity. Neither method is attractive for credit worthy consumers who want an unsecured loan at a competitive rate. CommunityLend may change all of that. CommunityLend is the first P2P lending and investment platform in Canada to be considered by regulators.
P2P lending brings the promise of a better win-win model that empowers both borrowers and investors. This is accomplished by providing a highly automated, socially networked internet platform that outsources the final underwriting decisions to the online community itself. That’s the breakthrough innovation. The market will determine the interest rate of a loan – not an institution.
“Without the Portfolio Plus Open Banking Interface I don’t know how we could have created a peer to peer banking platform that also met our user interface goals.”
-- Colin Henderson, Chief Technology Officer, CommunityLend
P2P lenders are considered investors. They will be investing small amounts of capital in many loans. Small accredited investors and large institutions alike stand to gain from a more efficient lending model that is possible with P2P lending. That’s the attraction.
P2P lending allows credit worthy borrowers to tell their own story. They can describe their need, propose a suitable interest rate, and rationalize their credit history as required. As an example, borrowers with high credit card debt could (or should) be looking to pay down that amount with a lower interest rate loan. This is an ideal problem for P2P lending to solve. If the borrower has a good credit rating, the P2P lending market may be able to offer dramatically lower lending rates.
In the fall of 2007, CommunityLend approached SIT to determine if a solution could be provided for the special challenges that P2P banking presents. After a period of intense research, CommunityLend was convinced that SIT’s Portfolio Plus product, with its Open Banking Interface, was the right choice.
CommunityLend had a unique challenge. Their web development team, Unspace Interactive, had chosen Ruby on Rails as their open source development platform, but had little experience with Portfolio Plus or banking software in general. Using the Open Banking Interface, available within Portfolio Plus, CommunityLend’s web development team was able to communicate effectively between the web platform and the Portfolio Plus banking platform by using messaging protocols. This provided a highly scalable and secure solution.
SIT, formed in 1988, develops and markets Portfolio Plus, an extensible banking system that enables customers to plug-in new functionality as required. This is accomplished via SIT's unique Plug-In BankingTM architecture and a Financial Services BusTM that extends Portfolio Plus functionality to other corporate applications. SIT's banking software enables banks and non-banks to offer web banking, loans, loan securitization, investments, term deposits, wealth management, retail, ATM/POS switch interfaces for debit/credit or loyalty products, leasing, Equifax and Trans Union credit bureau interfaces, registered investment products, and much more. Portfolio Plus can also be tailored, on request, to meet specific customer requirements.
Portfolio Plus, Plug-In Banking, and Financial Services Bus are trademarks or registered trademarks of SIT in the U.S., Canada and other countries. Any other trademarks or service marks contained herein are the property of their respective owners. For more information, please contact:
Strategic Information Technology
Telephone: 905-640-0808 x356
Questions? We have answers.
This page was created or refreshed on December 13, 2017 @ 16:04:20
by Strategic Information Technology (SIT) Ltd., Stouffville, Ontario, Canada
You're here to learn about: CommunityLend Peer to Peer Lending