In a move that is aimed at ensuring transparency, improve efficiency and bring legitimacy to the nascent peer-to-peer (P2P) lending sector, startups in this space are all set to invest in blockchain technology and develop a distributed ledger system between themselves.
From established players like Faircent to early-stage companies like IndiamoneyMart, PaisaDukaan and OMLP2P, all are trying to develop the industry’s first blockchain platform and also share data about lending transactions between them in order to mitigate frauds.
All these companies have applied and are waiting for the NBFC P2P licence from the Reserve Bank of India. “We are building a multi-tenant infrastructure using blockchain which will be used to implement the business rules like credit assessment and bring in models using smart contracts,” said Rajat Gandhi, founder of Faircent. “Further, this will also help us scale up our services globally and bring in more credibility since all transactions will be immutable.”
Faircent, has committed upwards of $1 million for this kind of solution which they feel will help them reap huge benefits when traction on these platforms picks up.
“Our main aim is to ensure that a consumer does not take loans from multiple platforms and ends up defaulting across causing serious trouble for the nascent sector,” said Rajiv Ranjan, founder of BigWin Infotech, a P2P lending startup which runs the platform Paisadukan.
“We are especially susceptible to such cases since our tech-based platforms have a shorter turnaround time and can help fraudsters take money from multiple lenders almost simultaneously.”
IndiamoneyMart, PaisaDukaan and OMLP2P have joined hands to form an inter-company distributed ledger system and hopes to attract other lenders to join them as well.
Though all these companies are new to this business and are yet to scale up, learning from the experiences of the sector in the US and China, the founders have become extra cautious about defaults and reckless players.
“We are moving as of now with three players and once things start rolling I believe the bigger platforms could also eventually join us, the more the players the higher the efficiency of the platform will be,” said Rajat Gupta, founder of IndiamoneyMart.
Industry insiders say that in case of P2P platforms, unlike traditional lenders, management of each loan is a huge challenge since every borrower has multiple lenders and contracts have to be signed between three parties for each disbursal.
“Once on a blockchain platform, accessing customer data will be very simple, there cannot be any tampering of the data thereby increasing reliability and also maintain data security,” said Surendra Jalan, founder of OMLP2P.
While some players are excited about the prospect of blockchain and its implications in the sector, there is a cautious lot as well.
“Players like us coming on a blockchain platform makes sense only when the government also starts getting all its records and documents on a similar platform, only then can we have a fool-proof system,” said Shankar Vaddadi, founder of P2P lending platform iLend.
