P2P Lending Technology

P2P Lending Technology – Make or
Buy
7 years agoOctober 26, 2011 wiseclerk
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moMe
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The core ingredient a new P2P Lending company needs is a platform to operate on. The importance of the
quality of the software used for the success of the business is high. Not only does interaction with the customer
nearly exclusively take place via the interface the website offers, but ideally most processes that are to be
conducted are built into the software.
Examples for these are interfaces to external suppliers of credit ratings, accounting functionalities and
interaction with necessary bank accounts, possibly document input and handling functions (e.g. income
verification).
Unlike other web 2.0 startups p2p lending companies cannot launch on a rudimentally developed platform and
eliminate bugs and improve functions on the fly in beta. Customer expectations regarding security, correctness
and reporting functionalities are rightly high when it comes to handling their money. The expectations of the
users are set by the trustworthiness of online banking services.
Another factor is – depending on market – the regulation authority that might require proof for the reliability of
the platform/processes
The management team has the choice between:

 Developing the software inhouse
 Hiring an external contractor to program the platform according to specifications made
 Buying a tested and proven source code and use that as start for future development
 Outsource the task to a whitelabel provider who provides the technical platform and future release
improvements
Developing the software inhouse
The advantage is that the software can very specifically reflect the ideas and needs of the company’s founders.
The disadvantage is the high risk to miscalculate time or budget needed.
Costs when starting from scratch are high. It has taken the p2p lending companies on average a year to develop
their platforms. The SEC filings of US p2p lending companies reveal figures on software development costs.
Furthermore quality and performance issues might be underestimated requiring rework.
Hiring an external contractor
This has the same risks as before as well as the requirement that the documentation of the needed functions,
layouts, database structures and interfaces has to be much more specific and detailed. This requires a very
comprehensive level of planning and upon delivery quality testing.
Buying a tested and proven source code
This option eliminates most of the cost and time risks. And if the selling company has established references of
p2p lending companies using it’s code then the quality risks are lower to. The remaining task of customization
is less complex: Adapting language files, creating the layouts, selecting functionality to be used and
implementing interface that are specific to the national market (e.g. automatic interfaces to credit bureaus).
It is mandatory for the further development success that the inhouse programming team that takes over the
responsibility for the software is well trained by the supplier.
Outsource the task to a whitelabel provider
While this option requires the least inhouse staff, it may restrict flexibility in product development. The
company becomes totally dependant on the (st)ability of the whitelabel provider. Since p2p lending is in its
early development stages this could be a risky decision. As a fallback the negotiated agreement should ask for
the right to get the source code and all data handed over should the provider fail or the contract end.
While the first active p2p lending companies had to use one of the first “two” options, later companies had the
choice between make or buy, and there are several examples meanwhile of p2p lending companies that bought
or licensed source code from other p2p lending companies and adapted it for use in other national markets.
In some markets on of the highest risks regarding time to launch is the legal and regulation aspect. A startup
hiring an inhouse programming team early, faces cost risks when legal or regulatory aspects postpone the
planned launch date.
The decision to buy source code can allow the company management to negotiate the deal, concentrate on
legal and other tasks (e.g. cooperations, marketing) and enact the purchase when the time frame for the launch
date is more secure.
If you are looking for tested, state of the art p2p lending technology to buy or license, contact me and I’ll
suggest a suitable supplier who can make you an offer that meets your requirements.
EDIT: This article was written in 2009. The situatuion has developed since then. If you are planning to start a
p2p lending amrketplace and looking for suitable software suppliers please check this newer information on
p2p lending software.
P2P Lending Software
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In September 2009 I wrote the article P2P Lending Technology – Make or Buy. Since then the situation has
developed. Nowadays I would not recommend to start developing p2p lending software inhouse or hiring a
contractor to do so. The major reason for this is not the cost aspect but the time to market. Developing from
scratch will cost months of coding and testing that can be avoided when buying a solution and continuing from
there or contracting a whitelabel provider that will host and develop the solution.
P2P Lending software suppliers
I have a list of several companies offering p2p lending software. Most are running a p2p lending service in
their own national market and are looking to license the solution to companies in non-competing foreign
markets. A supplier with a running platform offers the advantage that the potential buyer can review how
satisfied the users are (e.g. in forums or blogs).
Note that software for p2p lending does not come cheap. You have to expect to spend a six figure price plus
costs for localisation (language, process, interfaces) and design. For p2p lending there is no open source
software available – unlike for many other things, e.g. webshops. Naturally the development of a p2p lending
platform is not something you should outsource to a freelancer like a coding job for a script.
P2P-Banking.com can put you in contact with vendors
I frequently am contacted by founders that are looking for p2p lending software. I am happy to put you in
touch with suppliers. To allow me to pre-select matching offers please provide the following information when
you contact me:
1) Which national market are you aiming to launch in? Please describe the desired business model and wanted
features (e.g. auction, secondary market)
2) How is your company funded (business angels, VC, still seeking funding)? Note that it will be hard to enter
into negotiation with a supplier if you have no clear plan on how to obtain funding.
3) When do you plan/aim to launch your p2p lending service?
4) Have you determined a budget for the software&setup?
5) Do you want the supplier to adapt the software to your needs (e.g. localisation, interfaces, special process
needs) or would you just like to buy the source code as is? Or do you seek a hosted white-label solution?

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P2P Lending Technology – Make or

conducted are built into the software.

users are set by the trustworthiness of online banking services.

The management team has the choice between:

 Hiring an external contractor to program the platform according to specifications made

Developing the software inhouse

The disadvantage is the high risk to miscalculate time or budget needed.

Furthermore quality and performance issues might be underestimated requiring rework.

Hiring an external contractor

comprehensive level of planning and upon delivery quality testing.

Buying a tested and proven source code

responsibility for the software is well trained by the supplier.

Outsource the task to a whitelabel provider

planned launch date.

date is more secure.

p2p lending software.

P2P Lending Software

P2P Lending software suppliers

satisfied the users are (e.g. in forums or blogs).

P2P-Banking.com can put you in contact with vendors

you contact me:

features (e.g. auction, secondary market)

3) When do you plan/aim to launch your p2p lending service?

4) Have you determined a budget for the software&setup?

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