In the past few years, the progress in information technology has led to an ideal transformation in the international financial services industry. The availability of the web is slowly altering the distribution medium of cash from traditional banks to online platforms. The Peer to Peer lending platforms are gaining popularity and are slowly achieving the status of an alternative lending system by taking the place of banks. P2P lending is a new method of lending that connects borrowers to the lenders without the traditional financial institutions serving as brokers.
As per the research by a famous marketing agency, researchers predict that the P2P lending industry will grow from £19.79 billion to £679.09 billion in time ranging from 2015 to 2025. Obviously, as Peer to Peer lending has made a breakthrough in modern lending procedures, it has become an emerging platform in the credit markets. Besides its great success, online Peer to Peer lending is attracting plenty of optimistic opinions from researchers, investors, and policy creators. People generally consider P2P lending a source of investing and borrowing money that provides decent returns and favorable interest rates to lenders and borrowers. The research indicates that web-based Peer to Peer lending has perfect prospects in the provision of financial resources. It also shows several perks of web-based P2P lending, including effective capital distribution, affordable rates, and lower transaction prices than conventional banks and financial institutions. The essential nature of P2P lending and its emergence as a web-oriented platform increase the interest of researchers to analyze the influencing aspects that appeal to investors for investing in the web-oriented market hub.
Retail Investors are increasing their Investments in P2P platforms.
Retail investors are an essential worldwide Peer to Peer lending investment group. They are the key players in the capital market. Moreover, they differ from institutional and angel investors in that they invest with smaller capital amounts suitable for investing in the web-based Peer to Peer lending platforms. Also, this group includes young lenders that make up a big segment of the market. In this post, we will be discussing the aspects influencing retail investors’ decisions in making investments.
Trust is the Leading Factor in Influencing the Retail Investor’s Decisions in Making Investments
If consumers consider the Peer to Peer lending services to be safe and secure, they can trust them.
A greater amount of trust results from lesser risk levels in conducting the Peer to Peer lending transactions. Trust defines the degree of protection the consumers can benefit from. It ensures the growth of the P2P lending business. Many researchers support this relationship between trust and risk in the financial relations of consumers and P2P platforms. Also, several studies prove that there is a positive relationship between the retail investors trying out the web-oriented P2P services and their trust in them. Trust serves a necessary role in web-based transactional decisions. The success of Peer to Peer lending business greatly relies on creating trust between entities that participate in transactions and the P2P platform. The researchers suggest that social relations and well-known reputation play an essential role in building trust between the consumers of lending platforms and reducing the risk individuals feel when making transactions from the P2P platforms.
Just like any credit investing and borrowing hub, trust is always an essential aspect in Peer to Peer lending platforms. To determine the elements that promote international P2P lending, the researchers found that trust in borrowers and trust in platforms are the two primary factors that influence the investors in granting loans to the consumers.
The borrowers’ honesty in providing accurate background information, reputation, and credit score are essential factors for building trust in investors. To represent a specific effect of improving trust between lenders and borrowers, the experts advise that the lenders have the complete borrower’s profile details consisting of photos and age. This data should also consist of the borrower’s age and individual information to improve the lender’s trust. In research relating to proving the bond between investor’s distrust and P2P transactions, the researchers have shown that distrust of investors greatly bases itself on the bigger loan amounts and longer repayment time along with the geographic distance between borrower and lender.
Other aspects that also affect investors’ trust consist of the demographic details of the borrower, like cultural background, personal attributes, experience, and level of the business relationship and their business community.
To describe how the trust serves as a helpful instrument for affecting the lender’s decision in investing, the hypotheses below can help you.
Hypothesis:
The increase in the consumer’s trust level improves their trust in the P2P lending platform.
Conclusion
In the past few years, the growth in information and communication technology has led to an ideal change in the international financial services industry. The availability of the web is slowly changing the distribution medium of money from conventional banks to online platforms. The Peer to Peer lending UK platforms are becoming popular and are slowly gaining the status of an alternative lending system by replacing banks. P2P lending offers a new way of lending that links borrowers with the lenders without the conventional financial institutions acting as brokers. As per the study by a famous marketing agency, Peer to Peer lending is predicted to develop from £19.79 billion to £679.09 billion in time ranging from 2015 to 2025. Retail lenders are a necessary global Peer to Peer lending investment group. They are the key players in the capital market. If a client considers the P2P lending systems to be secure and reliable, they can trust them. A greater amount of trust leads from reduced risk levels while carrying out the Peer to Peer lending transactions. Research proves that there is a positive relationship between the retail investors trying out the web-oriented P2P services and their trust in them. The trust serves a necessary role in the web-oriented transactional decisions of investors. The borrower’s honesty in providing accurate background information, reputation, and credit score is essential for building investors’ trust. If consumers consider the Peer to Peer lending services to be safe and secure, they can trust them.
