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Fintech Innovation: How P2P Lending Is Emerging With Help Of AI?

The financial services industry has been experiencing the recent evolution of new technology innovations. The industry overall and many fintech start-ups are looking for a new lane to successful business models, the design of enhanced customer experience, and approaches that result in services transformation.

These platforms have allowed even niche products to find financial supporters and potential customers thanks to the global reach of the internet. However, peer-to-peer financing is not only about crowdfunding products but also includes P2P lending. It’s very similar to what a bank does – allocation of capital from one party to another, while acting as a middleman and risk mitigator. Obviously, the higher the risk, the higher the interest rate demanded.

Fintech companies have reversed this process with P2P lending. Companies such as LendingClub and Prosper have adopted the same model. Essentially, they have created a venue where individuals can earn interest by lending money to other individuals, and they take a small fee for brokering the connection. Rather than submitting a traditional application, borrowers secure loans by presenting compelling stories of why they need capital.

Let’s know how a new fintech innovation mapping approach that enables the evaluation of the extent to which there are changes and transformations in financial services.

  1. Faster Approvals and Funding

Regardless of the type of loan on offer, fintech companies tend to pride themselves on offering faster application, approval and funding times, especially compared to traditional lenders.


In contrast, peer-to-peer lending companies can approve and fund loans in less than 24 hours, and some companies are even faster.


  1. Utilizing Data

Fintech companies who offer online loans utilize a massive number of data points to determine how likely the borrower is to repay the loan. Now, the data can be collected and crunched within seconds to create a snapshot of the borrower’s creditworthiness and a likelihood of repaying the loan.


  1. Automating the Underwriting Process

In addition to providing data in innovative ways, fintech companies are also automating the underwriting process. Ultimately, automation decreases operating costs, allowing fintech companies to offer loans with competitive rates to borrowers.


  1. Offering Loans to More Borrowers

Because of their new lending models, fintech companies are able to embrace more borrowers than ever before. In particular, small business owners can now access loans and lines of credit without collateral, a virtual impossibility for many business owners a generation ago.


  1. Mirroring Millennial Attitudes About Technology

While fintech companies are changing the lending process, they are also mirroring millennials views on technology and lending. Similarly, Millennials tend to see lending as the potential domain of tech companies.


  1. Security Assurance

Because their focus is technology, fintech companies focus on safety. They have tech measures in place to safeguard consumer details. In particular, they use tokens to briefly see data from third-party sites.

In addition to the above mentioned financial services, investors across the world are taking a large amount of interest in financial technology (Fintech) companies. In fact, investment in Fintech organizations rose by approximately 10% to just over $23 billion in 2016 alone.


Artificial intelligence, also known as AI, has taken the marketplace lending by storm, allowing companies to cut costs, automate a variety of their processes, as well as boost their bottom line.


How lending startups are leveraging Artifical Intelligence?

Upstart is a California-based P2P lending company that is enhancing loans with artificial intelligence. Upstart uses machine learning algorithms, a subset of AI, to make underwriting decisions. Machine learning can analyze and correlate huge amounts of customer data to find patterns that would otherwise require considerable manual effort or go unnoticed to human analysts. For instance, it can determine if applicants are telling the truth about their income by looking through their employment history and comparing their data with that of similar clients. It can also find hidden patterns that might favour an applicant.

Upstart believes this can benefit people with limited credit history, low incomes and young borrowers, who are usually hit with higher interest rates. The company has also managed to automate 25 per cent of its less risky loans, a figure it plans to improve over time. This can save a lot of time and energy from lenders, who will welcome a return on investments that require less intervention on their part. The technology is planned to be available to banks, credit unions and even retailers that are interested in providing low-risk loans to their customers.


Avant, a Chicago-based startup that offers unsecured loans ranging between $1,000 and $35,000, uses analytics and machine learning to streamline borrowing for applicants whose credit score fall below the acceptable threshold of traditional loaning banks. The platform’s algorithms analyze 10,000 data points to evaluate the financial situation of consumers. For instance, these algorithms are helping the platform identify applicants who have low FICO scores (below 650) but manifest behaviour similar to those with high credit scores.

The company is also using machine learning to detect fraud by comparing customer behaviour with the baseline data of normal customers and singling out outliers. The platform analyzes data such as how much time people spend considering application questions, reading contracts or looking at pricing options.


Avant is exploring extending its services to brick-and-mortar banks that are interested in starting or expanding their online lending business.


Why do you need Artifical Intelligence in FinTech?

As seen above, artificial intelligence has great potential to be used in your financial services. Technologies are developing, and artificial intelligence becomes something common for us. The financial area can really benefit from artificial intelligence and smart chatbots and robo-advisors will tell you how you should spend your money wisely, and how you can make money with this.


Actually, artificial intelligence will simplify our life and make all financial processes more secure and faster. So keep it in mind if you still have any doubts!


Concluding all

P2P lending is one of the most revolutionary and disruptive financial innovations of our times. Modern technology, lifestyle, and the way we earn, spend, and invest are the lifeline of P2P lending. It provides many left behind a chance towards financial inclusion. With borrowers well rated and mostly paying on time, with the promise of decent returns and the simplicity of asset class, with a conducive regulatory framework, and greater data-transparency in the system, P2P lending will become more profitable investment platform in coming years.


Hence, adopting AI in Fintech will allow companies to boost their productivity and increase their bottom line. After reading this article you must have got a thought to develop such P2P lending apps..right? Then this is a pitch time to get in. Coruscate, leading ios and android app development company providing a customised solution can shape your thoughts give better success in form of application. Let’s have a call!