It is undeniable that the collaborative economy is booming. The fintech sector has taken advantage of the benefits of new information and communication technologies to connect people who need financing with those who want to invest their savings knowing where they are investing. This is the basis of P2P.
Here are 5 key points to understand the operation of the P2P :
- The borrowers or entrepreneurs. They are those who seek financing for their projects in a fair manner. The growing demand of entrepreneurs who need investment for their projects is unstoppable, but given the global economic difficulties and obstacles to access the more traditional financial system, they have resorted to alternative financing platforms.
- The lenders or investors. Many individuals have seen how their savings, far from growing in traditional bank deposits, are not getting the return they expected. Likewise, the concern to invest in complicated financial products has led them to look for alternative ways to invest their money. Many have preferred to obtain better returns by financing other people’s projects like them.
- The digital meeting platform. For the meeting of the two parties, participatory financing platforms (PFP) put their resources at the service of investors and entrepreneurs so they can meet. The technological meeting tool is not the only thing that the platform offers, but it provides the parties with security, guarantees and makes all the arrangements so that the loan can be carried out. The platforms analyze the profitability of the projects and categorize the investments. Aramis, for example, also offers its own Coverage System, a pioneer in the sector, that protects investors against defaults.
- The regulation The Law on the Promotion of Business Financing regulates participatory or mass financing systems. Spain placed crowdlending within a visible legal framework that grants a legal protection to financing collectively, placing all ‘fintech’ financial operations within the most absolute legality.
- Differences with traditional banking. Who requests the loan through P2P platforms is more likely that, if the application is accepted, the interest is less than that required by banks and savings banks. Those who are looking for an alternative to traditional investment modes will obtain greater profitability and know exactly what project they are investing in.
The opportunities and options of P2P platforms are so attractive that many banks want to join and offer online solutions quickly and easily, although their products are far from participatory financing. The new participatory financing (PFP) platforms are undoubtedly reinventing the world of finance.