Lending platform development

A lending platform is one of the tools that allows small and medium-sized business projects to receive financing. It is a mechanism for borrowing money between individuals within the framework of special online platforms. Online platforms accumulate all kinds of lenders and borrowers, giving them the opportunity to meet and offer mutually beneficial terms. For several years, the Boosty Labs team has been successfully involved in lending platform development outsourcing. We are a world-class fintech and cloud engineering team with a solid background of practice that combines consulting, strategy, design and engineering at scale.
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Outsource lending platform development options

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Prerequisites for the implementation of a lending platform

  • Low level of automation of the processes of preparation and passing of lending documents.
  • Weak management oversight of loan applications.
  • Inability to determine the location and status of the loan application at any given time.
  • Lack of promptness in the transfer, approval and execution of loan applications in remote offices.
  • Lack of control over the timing of the application.
  • No guarantee of delivery of documents for loan applications to the addressee.
  • Lack of automatic notifications about the approval or execution of loan applications.
  • There is no possibility of analyzing and collecting statistical data on refused loans.
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Main features of the platform

  • Authorization of platform users;
  • Entering an order;
  • Registration of a loan application;
  • Passage of the application through the stages of approval and checks and assignment of certain statuses to it;
  • Formation of requests to external systems and transformation of responses.
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Types of lending on the platform

  • The system automates the process of passing a loan application through all stages, thereby increasing the level of security of documents, as well as the degree of control over applications;
  • The system differentiates and automates various types of lending, taking into account their specific features;
  • There are five main types of loans in the system: small business loans; car loans; mortgage credit lending; customer credit; express consumer lending.
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Control mechanism

The control mechanism implemented on the platform allows the system to view documents (the state of affairs on them, assigned executors, reporting) of branches, additional and operational offices not only to local bosses, but also to heads of the head office, which gives certain advantages in prompt management decisions.

Key features of the lending platform

Credit program base

The platform automatically collects, stores, updates and analyzes huge amounts of banking data. Loan programs are a collection of several hundred different conditions and criteria. For example, each loan program has its own interest rate, which depends on the geographic region of the country. In order to ensure that the client receives the best offers, the Platform updates and analyzes many millions of records in real time.

Search for loan offers

The broker generates an online request, which contains about 50 different criteria. Together, they determine the credit conditions of the client. The platform analyzes this set of parameters in real time and compares them with a variety of lending programs of participating banks. As a result of the analysis, the client is provided with lending offers on the most favorable terms for him.

Wide range of tools

The main category of active users of the platform is credit brokers. They are the ones who carry out all the operations for preparing a loan request and selecting the best offers for clients. The platform provides them with a wide range of tools for doing business online. This is a personal account, processing client applications, tools for searching and selecting loan offers, collecting reports and statistics.

Data processing intensity

All banks participating in the platform regularly update the parameters of their loan programs. For example, interest rates are updated daily. There are 250 member banks in the system. An average member bank supports about 300 lending programs, and a large one up to 700. Each program has up to 100 possible interest rates, which depend on many criteria. As a result, the intensity of data processing when updating information reaches 10 million records per hour.

Operations history

The platform accumulates and stores the history of changes in absolutely all parameters of bank lending programs. It also provides the participating bank with the ability to amend the criteria for the future. For example, schedule a 4.7% interest rate change for a specific loan program, which will automatically take effect after 1 month. This functionality allows brokers to select loans for any date in the past or in the future.

Broker profit calculation

The most sophisticated tool of the Platform is the value added function, which takes into account the benefits of the mortgage broker. This amount can be calculated by the Platform in a variety of different ways, depending on a huge number of criteria for lending programs. The calculation is performed automatically and the values ​​are taken into account by the Platform in the final proposal for the client.

P2P lending (person-to-person lending) is the direct issuance of loans from a depositor to a borrower without the participation of traditional financial institutions. This service is provided by specialized platforms where the user can act as both a lender and a borrower. The idea of ​​these platforms is simple - borrowers get cheaper loans (it is assumed that the costs of lending platforms are lower than the costs of banks), and investors get access to direct investments in loan portfolios at more profitable risk-based interest rates compared to deposits / bonds of a bank. sector.

P2P market leaders offer a wide range of types and conditions of lending and, accordingly, investments in these loans:

By type of loans: unsecured consumer loans; small business loans; car loans
Bridge loans secured by real estate; 

  • Invoice financing, etc; 
  • Term: 1 – 72 months; 
  • Debt amortization: 1) payment of the body of the debt as at the end of the term, 2) payment in installments; 
  • Interest rate: 5% – 25% in USD/Euro;
  • Default rate: 2% -30% depending on the level of credit risk; 
  • Collateral and guarantees: secured and unsecured, with or without third party guarantees. 

The main practical difficulties when investing in the P2P market are as follows:

  • Choosing a P2P platform (variety of platforms, legal problems, etc.). 
  • Correct assessment of credit risk for individual loans (the need for a correct assessment of the level of defaults). 
  • Creation of a diversified portfolio (portfolio allocation for individual loans). 
  • Timely portfolio rebalancing (labor-intensive process without automation). 
  • Low liquidity of many platforms and loans (the need to wait for the end of the loan term). 

Bank competitors

The key success factors of the platforms are technological advantages. On the supply side, success is driven by a user-friendly interface, 24/7 availability, and a simple and fast loan application process. On the demand side, interest in online platforms is determined by the profile of borrowers: as a rule, they have no collateral, there are credit restrictions on the part of banks, weak creditworthiness or an empty credit history.

Initially, online platforms were focused on the sub-prime segment, that is, for those for whom bank credit was not available or expensive. But by starting with unsecured consumer loans, the platforms have gone ahead, targeting student loans, car loans, mortgages, and small and medium-sized business loans. Online loans can largely replace banks' consumer loans among existing clients.

The unregulated activity of online platforms and their competitive advantages make online loans thrive. Platforms do not need to support costly branch networks, servers, and data centers that must meet operational risk management requirements. Online platforms rely on simple web solutions, third-party call centers, automated credit risk assessments, and cloud-based software. They have no reserve requirements, no deposit insurance premiums, and no other costs associated with the regulatory burden.