Peer-to-Peer lending (or P2P lending) have been one of the most mentioned terms on Vietnam's financial market recently. With services like providing unsecured & installment loans, many financial institutions, both private and public, have implemented P2P-lending-related technology in their services. So what exactly is P2P lending and how does it work?

How does P2P lending work?

Peer-to-Peer lending is a modern-day lending service in which lenders and borrowers are connected through an online service platform. Companies providing P2P-lending platforms like Lendbox usually don't directly take part in the process as lenders, but instead merely as providers of technology foundation and tools for people with lending needs to access suitable loans from actual lenders. 

Moreover,  thanks to modern financial technology, P2P-lending platforms like Lendbox also significantly support lenders or investors by providing credit scoring & profiling services in order to ensure the credit risks maintain at the lowest level. In Vietnam's financial market today, P2P loan packages are mainly unsercred or consumer loans in which borrowers don't have to mortgage any substantial assets like rear estate, transporting vehicles or saving accounts; however, the values of these loans are considerbly smaller than normal mortgage and bank loans.

The evolution of P2P-lending services 

When the era of Internet and e-commerce began in the early 21th century, financial services also gradually started to transform to digital and P2P-lending services were brought into the loan market then. 

In 2005, UK and the world's first P2P-lending platform - Zopa was established. However, not until 2010 was a significantly large P2P-lending platform (Funding Circle) introduced in the UK with the initial purpose of providing loans for small businesses. As of now, Funding Circle has been supporting more than 81,000 global small businesses with loans valued at £8.7 billion. The UK's government has also seen the potential this as it evidently invested in P2P-lending market £20 million in 2014 and £40 million more in 2014.  

In the US, the peer-to-peer lending market also started in 2006 with Prosper, followed by Lending Club - two names that are still leading in terms of revenue and loan value in the market. P2P Lending school in the US. During the financial crisis (2007-2008), many individuals, as well as small businesses, turned to peer-to-peer lenders to have trouble getting loans at banks - financial institutions met many difficulties in crisis period. Currently, only with Lending Club and Prosper, up to 67 billion USD has been borrowed since the two names appeared in the peer-to-peer loan market.

For the Australian financial market, in 2016 the government made moves to encourage fintech or fintech-related businesses (including online loans through P2P Lending) by forming A pilot Sandbox mechanism for fintech products in 2016 - something the Vietnamese government is also trying to implement in early 2021.

Current situation of peer-to-peer credit & loan market in Vietnam

The rapid development of information technology in Vietnam in recent years is the springboard for financial technology services, including peer-to-peer lending, to become more popular with consumers. With technologies like AI, Machine Learning or Big Data, peer-to-peer online lending service providers like Lendbox can quickly review customer records through credit scores, thereby developing more. New form of unsecured loans - much quicker and simpler than traditional unsecured loan services.

However, currently in the loan market in Vietnam, many companies are advertised as an intermediary providing peer-to-peer loan services, but actually play a direct role as a lender with untold terms. This is similar to the 'black credit' form. If you are a person reading news on newspapers like VNExpress or Dan Tri, you must be too familiar with articles warning about black credit lending from China entering Vietnam. under 'fast online loans' or 'daily consumer loans'. Introduced as peer-to-peer loan applications, but after being 'uncovered' by the authorities, these units are essentially 'creditors' from China who make illegal profits from operations. black credit'.

The reason Vietnamese consumers still bear many risks when they borrow peer-to-peer loans in the form of online loans is because the government and the State Bank of Vietnam currently do not have a clear legal corridor for peer-to-peer lending activities. This leads to the borrower's misunderstanding about the peer-to-peer loan service and the choice of unsecured loan addresses, leading to unpredictable financial consequences. Therefore, the upcoming trial peer-to-peer lending solution by the government in 2021 promises to help consumers feel more secure, opening up opportunities for peer-to-peer lending services like Lendbox to satisfy their needs. legitimate online loan request from customers.

The future for peer-to-peer lending in Vietnam

In fact, with financial and banking services being supported a lot from information technology and moving to digitalization, peer-to-peer lending will no longer become too unfamiliar to consumers. used in the coming future. Especially when the government is about to launch a legal corridor to take measures to monitor and test units in the market and protect consumers, customers will have more options when needed. Get financial support through FMCG loans or online loans.