What are your thoughts on P2P Lending as a segment?

P2P Lending has been trending due to the likes of CRED and BharatPe’s 12% Club powered by LenDenClub. Although it has been around for a while, the buzz for the segment seems to be revived. I have personally started investing in LenDenClub and have been getting good returns. What are your thoughts on this investment alternative?

In my idea P2P would not work as pure P2P stack and rather it should be Peer to aggregators to Peer Stack.

The essential role of aggregator here.

  1. Build a user stack with credit profile (not credit score)as Aggregators now have access to most financial transactions so they can leverage technology to prepare a personalised interest rate and credit risk (A fixed 12% interest thing just doesn’t seem to work)

  2. A middle man(aggregator) who can take a shared risk for both lenders and borrowers which will essentially build trust in the system.

  3. Most users should not have a problem earning a 10% interest or 8% interest if the risk is shared by some common aggregator.

  4. To build a massive P2P stack we will need to invest in basket type credit lines rather than giving loans to direct users eg: home loans for people with avg salary of 25LPA, bike loans/car loans for users with credit score 800+, businesses with annual revenue 1cr etc.

  5. Building baskets will minimize risk and default rate.

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This is crucial for any p2p platform to gain trust.