P2P (Peer to Peer) Lending Platform Software

In order to obtain financing for their projects, startups and large companies are increasingly moving away from traditional loans from banks and choosing an alternative - crowdfunding. According to a report by IMARC Group, in 2023, the volume of this market is estimated at $16.5 billion. In the future, stable growth is forecast with a CAGR of 11.26%. There are many prerequisites for this: growing digitalization, the development of blockchain, machine intelligence and AI technologies, and the increasing number of startups. So launching your own platform to help bring investors/lenders and borrowers/startups together could be a lucrative solution. But crowdfunding can range from P2P lending to real estate tokenization platforms. Let's sort out all the nuances, assess the market and outline what are the ways of launching a p2p lending platform.

What is lending software?

Lending platform allows raising funds for various projects from a large number of contributors. In fact, such sites act as intermediaries between companies/startups/borrowers and investors/lenders. The platforms may have different objectives:

• Attracting investors for personal fees. A popular service is GoFundMe;
• Finding sponsors for charitable projects. Example: Chuffed;
• Finding funds for existing businesses or startups, example: Kickstarter;
• Raising funds for scientific projects, example - Experiment website and so on.

The general and simplified scheme of crowdfunding sites can be described as follows: a startup/company publishes the essence of the project on the platform and specifies the terms and amount it wants to raise -> investors make payments through the platform, which processes these transactions -> the collection is closed -> the startup/company realizes the described goals and pays the agreed rewards to investors through the platform.

The models of such sites can be different, let's consider the main variants:

• Debt financing. P2P is the most common option. Taking a loan directly from investors (peer-to-peer principle), bypassing the usual intermediaries in the form of banks. According to reports for 2023, the volume of this niche was estimated at $83+ billion in the US alone. Types of loans can vary: for personal needs, for educational projects, for launching a startup or developing an existing business. Moreover, the interest rate is often more favorable when compared to official financial institutions. Private lenders can get more profit this way than with other types of investment (e.g. buying bonds/deposits);
• Reward-based financing. The essence is simple: investors invest in a project/startup that interests them and receive a certain and predetermined remuneration, but this does not include a share of the company or % of further profits of the project. For example, one may receive a certain product/service from the funded project. Often, the larger the contribution amount, the larger the reward you can expect. The volume of this niche in 2023 was estimated at $1.42 billion. Creative or scientific and educational projects are most often registered on such platforms. Financial gain for contributors does not play a primary role;

• Investment financing. It is a way for individuals/companies to invest in order to receive shares/share in the company/% of further profits. The amount of financial benefit largely depends on the success of the chosen project. Real estate tokenization marketplaces are one of the popular options. The target audience of such platforms are startups/businesses and professional investors. This type of project is characterized by high risk, as it is possible to lose all invested funds. The volume of this niche was estimated at $13.34 billion in 2023.

What are the obligations of such platforms?

The idea is simple - these sites act as an intermediary, and also act as a guarantor of compliance with the terms and conditions and safety transactions. All platforms must operate in accordance with the laws of the countries where they provide services, for example, in Europe it is necessary to adhere to the regulations on basic conditions (ECSPR). Often they are subject to the rules of such regulators: in the US - the SEC, FTC and FINRA, in Germany - BaFin, in the UK - FCA and so on.

Other nuances and features of functionality may differ depending on the model of the platform. Let us have a look at them in the table below.

Platform type	Duties/Functionality
P2P lending	Transaction formalization: drafting of legally correct agreements between the borrower and the lender, verification of participants with verification of their financial history
	Checking borrowers' solvency
	Monitoring debt repayment and implementing mechanisms to recover funds if necessary
Reward crowdfunding	Only projects with fully described conditions will be accepted for publication
	Review projects to minimize the risk of fraud
	Monitoring the receipt of promised rewards
	Providing secure payments via the platform
	Control over the usage of attracted funds
Investment crowdfunding, including real estate tokenization	Project due diligence
	Publication of projects with clear risks/capitalization/level of income, etc.
	Providing investors with data on the performance of the company in which they have invested

How do owners of such platforms earn money?

The main source of income for crowdfunding sites is commissions. For example, if the basis is P2P lending, they often charge 0.5% to 5% of the loan amount to investors, and 1% to 6% to borrowers. If equity-based, platforms often retain 6-7% of funds raised and 5-7% of profits. When it comes to tokenizing real estate, management fees of 1-2% are set. Commissions are also charged for payments - for example, between 2% and 5% for processing transactions.

A paid subscription system can also be implemented. The higher the level and the higher the fee, the more functionality is available, e.g. extra analytics tools. Companies/startups can get additional advertising if they buy a higher subscription level. For example, on Patreon, the fee varies from 5% to 12% of revenue depending on the level.

Separate fees may be charged for legal processing of contracts and other costs required to comply with the law.

Market Analysis

In 2024, the startup trend continues, and digitalization and new technologies from AI to ML make this way of interaction even easier, safer and more popular among different groups. So the target audience for such platforms is wide: from private and institutional investors to SME owners. However, people under 40 who are interested in innovative ways of financing and understand modern technologies are usually registered on such sites. According to forecasts, by 2029 the total market volume can be estimated at $55.58 billion.

Crowdfunding is particularly popular in developed economies such as North America, Europe, and Asia-Pacific. As of mid-2024, there are more than 500+ fundraising sites operating in the market. Market leaders: in P2P lending - LendingClub and Mintos, in reward crowdfunding - Kickstarter, Patreon, in investment crowdfunding - CrowdStreet, Fundrise, WeFunder. Let's take a look at the top sites and services.

LendingClub

The market leader in P2P lending in the US. The platform brings borrowers and lenders together and performs a thorough pre-audit so that the risk of fraud is minimized. There is an educational section and a mobile app. Commissions to borrow are between 1% and 6%, and the service fee for investors: 1% of income.

A credit rating and interest rate are formed for borrowers, for this purpose a preliminary analysis of their solvency is made. Various types of loans are supported: for personal needs, for business, for refinancing and others. The terms of agreements are flexible.

Investors are often attracted to the investment platform, as it is convenient to create a diversified portfolio of different loans. When choosing a borrower, they receive full information about him and his rating. There is support for the option of automatic investment according to predetermined parameters.

Kickstarter

A TOP platform in the US that focuses on creative projects in need of funding. Users create fees, describing in detail the essence of their idea and specifying the necessary amount and terms to receive funds. Contributors, on the other hand, can receive various types of rewards of their choice from the author of the project:

• Author copies of books;
• Letters of appreciation;
• Unique products, etc.

In case the project does not collect the full amount by the end of the term, the funds are returned to the depositors. Thousands of books, paintings, design collections, music albums, mobile and board games have been funded and released thanks to the platform. The services are often used by artists, musicians, writers, cartoonists, and indie developers. The most popular categories are games, technology and design.

The service earns money through commissions: 5% of the funding amount + extra fees for payment processing. By October 2024, $8.310 billion has been raised and 266,556 projects have been successfully completed.

Fundrise

It is a unique real estate crowdfunding platform that allows you to buy property shares in the United States. The specialty of the project is that you can invest in tokens. This approach provides greater security and transparency, and also sets a low entry threshold - from $500 (as assets can be divided into smaller shares). In real estate investing, such a minimum amount is considered a low limit, so the site attracts a wider CA.

On the platform the portfolio diversification option is supported, there are analytical tools. The site earns at the expense of commissions. This includes a management fee of 1% per year and additional commissions for acquiring assets (this amount is usually already included in the total cost).

CrowdStreet

One more popular crowdfunding platform in the US. Its specialization is real estate investments. It has a narrow profile: accredited investors. That is, they must confirm that their income is from $200,000+ per year or they have $1 million or more in their account.

Through the site they can find interesting and profitable projects and work directly with operators of commercial projects (offices, warehouses, apartment complexes). Minimum investment: from $20,000. Investors get access to all project materials, risk reports, and financial models. The site also provides direct communication with developers.

Commission for developers ranges from 1% to 3% of the amount financed. There are also extra fees: performance fee, service fee and transaction processing fee.

How to launch your lending platform?

Developing your own crowdfunding website is a laborious process. As it is necessary to provide all the necessary functionality, the security of payment transactions, and also to take into account legal aspects. You can develop a platform from scratch for individual needs or order White Label solution. The first option should be chosen if you have non-standard ideas and want to launch an atypical resource that is radically different from competitors. For example, you want to introduce blockchain technology, AI and other things that are not included in the standard basic package. But such development is more time-consuming and will require large financial investments.

White label software is the use of a ready-made template that will be further developed: UI/UX design will be modified, specific functionality will be added, branding will be carried out, and so on.

Order a platform from Merehead

Both options are offered by our company Merehead: either developing from scratch or buying a White Label solution. We develop websites and applications with a focus on the field of investing, modern technologies and cryptocurrencies. Our consultants will help you:

• choose the most suitable platform model for your request;
• create a UI/UX design that will both meet your preferences and reflect modern trends;
• select the required functionality.

The approximate price for the simplest solutions is $40,000+, more complex ones - $60,000, the most functional platforms with a lot of additional options will cost from $60,000 to $120,000. Please contact our managers for more detailed consultation and discussion deadlines.

What to look out for in the design?

In the first step, you need to decide the type of platform. In essence, you need to answer what kind of projects users will be able to open: whether it will be creative startups, P2P lending, real estate investments or another option. Analysis of competitors shows that some platforms combine several types, but there are also narrow-profile. This choice will determine:

• The functionality of the platform;
• Legal aspects, as, for example, investment crowdfunding has more serious requirements from regulators. The country of registration of the platform and where it will provide services also plays an important role;
• The target audience for which the UI/UX design will be developed.

Decide at once what criteria you will use to select projects. Reputation plays a key role in crowdfunding, so you need to create a detailed questionnaire that participants will fill out. At the initial stage, you also need to determine what level of identity verification will be required from users. This will affect the further development of the functionality of the site.

Next is the choice of interface. The 2024 trend in UX/UI design, which is predicted to continue for a long time to come, is simplicity and inclusivity. The interface should be intuitive and accessible even to a newbie who is interested in this way of investing/fundraising for the first time. It should be clear how to register, verify and apply for a project. Adaptability of design for mobile devices is a must in 2024.

Next, you need to decide on additional options: whether analytics tools will be provided, graphs and charts to illustrate the fundraising process, filters for ranking projects/borrowers, a training section, and so on. Also, visualize in advance what information will be displayed under each specific project and what function buttons will be available.

As these sites are directly related to financial transactions, it is important to provide enhanced security. For this purpose, they often use:

• SSL/TLS protocols for encryption;
• 2FA authentication;
• Mechanisms for tracking transactions;
• Systems for backup.

The choice of available payment methods is also important for attracting and retaining users. It is necessary to integrate various services: e-wallets, online systems for conducting transactions, crypto-wallets and so on. Top sites usually support PayPal, Bank Transfers, ACH, AdvCash and so on. Take into account the localization of your CA to provide the most convenient ways to make payments.

You also need to ensure communication on the platform. This includes maintaining technical support options (online chat, links to messenger channels), as well as providing communication between investors and project creators/borrowers.