Tuesday Team Talks № 14:
China’s P2P Lending Crisis & Distinguishing True P2P Lending Platforms
As part of our new content delivery initiatives, we’d like to announce that our Tuesday Team Talks, which are primarily community focused, will be now scheduled bi-weekly on weeks 2 and 4 of every month, and we’re spending the extra time to put together informative newsletters for growing SMEs and lenders who will be eventually joining our platform which can be subscribed to via our website in a few weeks.
China’s P2P Lending Crisis
China has the largest P2P lending industry — it’s so big that it surpasses the rest of the world combined. The industry is currently valued at approximately US$217.96 billion (1.49 trillion yuan). There has been a huge growth spurt in this unregulated industry since 2007. Since then, lenders and borrowers alike have benefited from the system, but in June 2018, many of these lending platforms went bust because it had been revealed they were not true P2P lenders, but rather acting as a rogue bank collecting deposits from unsuspecting lenders and wildly investing with their funds.
The Chinese government implemented a June 30th deadline for all P2P lenders to meet new practice standards. Instead of complying by these newly established regulations, most of these platforms chose to shut down operations and have caused massive panic in the Chinese market as investors desperately tried to find avenues to recover their investments.
This indicates a fundamental problem with how these ‘P2P’ lenders have operated, often without the interests of their customers in mind. In such closed-door operations, investors are not able to make true credit decisions and thus not aware of the true risk they are taking. With constant incoming cash flow from new lenders, investor losses are not reported and thus go by unnoticed.
As a counter to these practices, the Chinese Banking and Regulatory Commission mandated that unlicensed P2P lending platforms’ role should be limited to matching investors and borrowers; without pooling funds from investors and providing credit decisioning or advice. By limiting them to just ‘information intermediaries’, the risk for scams is drastically lowered.
Protecting the Users
P2P lending is revolutionizing the financing sector, unlocking liquidity previously trapped in financial institutions to benefit the global economy as a whole. By forcing unregulated P2P lenders to only act as information intermediaries only, these rogue organizations will have a lower chance of being able to fool investors into dealing with proprietary credit models disguising bad credit as good investments.
Additionally, true peer-to-peer lending models should involve the lenders interacting directly with the borrowers, and having direct payment exchanges between them — without the platform as an intermediary. This further reduces the risk of the organization misappropriating the funds and ensuring they are only acting as a facilitator on initially agreed-upon conditions.
With clearer regulatory stances in this new age of innovative financing tools, the world is ready to accept solutions that are inherently more transparent and fair for its users. We are witnessing organizations moving in tandem towards global prosperity and financial empowerment for all; with FintruX Network leading the charge with the first true peer-to-peer lending solution for SMEs to make financing easy, fast, and highly secure.
Distinguishing True P2P Lending Platforms
For FintruX Network, building a transparent financing ecosystem with trust has been our mission from the start. We wish to enable lenders to make their own credit decisions based on facts, market insights, and/or third-party analysis; giving them unprecedented control over their investments for the very first time. Additionally, by generating a unique smart contract for every loan agreement that is open-sourced for the participants involved, there is no need for arbitration on the terms and conditions of the loans; as well as the status of repayment at any given time. To our knowledge, we are the first true P2P lenders who are operating in this fashion. To this end, we’d like to announce that we’re officially updating our tagline from “The Global P2P Lending Ecosystem” to “The True P2P Lending Ecosystem” to ensure that our message and sentiment is consistent. This change will be reflected in our marketing content and websites over the next few weeks.
With licensing opportunities unlocked, transparent platforms like ours can exponentially grow to provide further security and features for our users. With a securities license, we’d be able to better manage funds in the cross-collateralization pools and provide greater levels of insurances for potential defaults. Furthermore, we’d be able to expand our asset classes to provide bigger loans at lower interest rates for borrowers who have certain collaterals, and trading of loans would also be available. We are strongly pro-regulation, and are excited about the future this holds for us.
Yours truly,
The FintruX Team
This article is intended to be for general information only and does not in any way constitute professional or financial advice. Interacting in marketplace lending services carries a certain level of risk that may not be suitable for some. Consider your investment objectives, level of experience, financial resources and other relevant circumstances carefully.
Ask the experts :
FintruX Network’s true P2P marketplace lending is possible due to our revolutionary technology. That is why we have a dedicated support team that is always available and willing to help you understand our ecosystem better. Reach out today and learn how you can be part of this new age in enabling SMB development and growth.
Reach out via email at — support@fintrux.com
Learn more by reading our whitepaper.*
*We regularly update our documentation as technology and business trend shifts demand process and workflow improvements. Stay tuned for a major update coming soon!
About us: FintruX Network is the true P2P financing ecosystem powered by blockchain and no-code development. FintruX facilitates marketplace lending in a true peer-to-peer network to ease the cash-flow issues of SMEs that typically face challenges getting loan financing, such as startup companies.
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