Modern consumers are offered a wealth of convenient, on-demand services directly from their smartphones; money lending apps are a natural byproduct of mobile technology and an on-demand economy.
In times past, you would have to go to a bank, credit union, or another lender, wait in a line, go through an application process that included a credit check to prove your creditworthiness, and after all that, you had no guarantee you would be able to borrow money.
Today, thanks to FinTech innovations, you can get a personal or payday loan from an app or website and directly deposit the money into your external bank account without ever leaving your house or paying a loan origination fee.
P2P, or peer-to-peer, lending apps have gotten very popular with FinTech startups and consumers alike. Especially people who don’t want to wait for their next payday to have extra cash. These apps help users get money instantly, or nearly instantly.
There are a lot of complexities and legal requirements that need to be dealt with when creating a banking services app. These laws and regulations will vary based on your locality, so we’re not going to explore that side of building a personal loan app. Instead, we will explain how P2P loan apps work and what key features you’ll need to include if you are interested in building one of your own.
How do P2P Money Lending Apps Work?
Traditional loans go through a loan broker like a payday lender or a financial institution like a bank or credit union. P2P loan apps change the dynamic between lenders and borrowers. In a lending app, borrowers and lenders are treated as equal parties.
This allows borrowers to negotiate interest rates and repayment terms directly with the lender. Lenders are also allowed to handpick the loan applicants they would like to lend to. This dynamic gives consumers more options to borrow money at terms more favorable than traditional banking.
In the majority of cases, the lenders are private citizens. In some cases, businesses might be participating in the lending process as well. An easy way to illustrate how these apps work is to use the example of Uber. Uber connects drivers and passengers through their platform, but Uber does not offer rides itself. Personal loan apps work to connect lenders and borrowers in a similar fashion.
Most cash advance apps allow users to set up a direct deposit, so their incoming payday loan goes directly to their debit card or savings account. This gives them immediate access to their loan money.
Often, repayment of cash advance loans can be made directly from their bank account to the lender on the platform when they get their next paycheck. This process is far simpler than the traditional banking model.
The app makes money through transactional fees between borrowers and lenders. Often this is assessed as a small percentage of each individual loan amount charged to the lending party. After all, they are the ones making a profit through interest rates.
What Key Features Does a Money Lending App Need to Have?
The FinTech industry has disrupted traditional lending and banking for good. Still, while there are a lot of innovations to be made, there are some features and services that need to be included on any app that accesses personal accounts or handles personal loans.
Key features or services that need to be included on any FinTech app include:
- User profiles
- Loan application
- Record of transactions
- Payment options
- Push notifications
Getting users registered is a major priority. In order to maximize your user base, you need to try and make the registration process on your app as easy or frictionless as possible. You don’t have to gather all of a user’s personal information right at registration. Remember, they are going to have to fill out a loan application later on in the customer journey.
Your goal should be to make the registration process as simple as possible. You can give your users the ability to register using their phone number, social media accounts, Gmail account, etc. The easier it is to register, the more users you will attract.
Once your users are registered, they need to be able to manage their profile. This gives you another chance to collect additional personal information too. Things change all the time, so it is important that your users are able to update and make changes to their profiles whenever they need to.
From the user profile page, your users should be able to view their bank account information and access additional key features like their record of transactions, loan status, payment options, etc.
If you’re creating a cash advance app or a personal loan app, your users should be able to complete all of the necessary loan application steps directly in your app. This is the key feature of any P2P loan app. Your product design is going to be crucial for your long-term success.
If you want to create a great User Experience, break up the application process into smaller pieces, and help guide your users through the process. Displaying application progress is an easy way to help users get through the application. You can also include an auto-populate feature that helps reduce the amount of redundant information that your users need to enter.
Record of Transactions
Besides the loan application itself, your users also need to be able to view a log of the transactions they’ve made. This includes loan payments made, cash advances received, direct deposit history, and remaining debt. All of this information should be easy to find and easy to understand.
Pay advance apps with a simple User Interface and easy-to-access information will be far more successful with mobile app users. Make sure that your users can easily find, manage, and understand their personal loans.
If you can, let borrowers pay back their loan balance directly from your app when they get their next paycheck. There are a lot of different payment options available to consumers. The more you include in your cash advance app, the more successful you will be with consumers.
Give your customers the ability to make payments using their credit card, debit card, bank account, or even an alternative payment method like Bitcoin. Consumers like to have options, and in today’s on-demand economy, there is no shortage of them. Be sure you are giving your users ample payment options.
Push notifications are a key feature of the mobile experience. Notifications can help remind your users of upcoming payments, recent direct deposit activity in their bank accounts, loan approval, and more.
App users expect to see push notifications. Be sure you include them in your payday advance app so that you can keep your users abreast of all key information, such as bank account balance, without them having to open your app.
Additional Features You May Want to Include
The above features are the ones that we consider essential for a Minimum Viable Product (MVP). However, you can make your cash advance app even more attractive to users by adding additional features that will help make their lives easier.
For one, it is smart to include chat support or a chatbot feature that can help users when they have a question or an issue. When it comes to financial matters, questions and concerns are going to arise; it is smart for you to include some type of support system to help your users in need. Failure to include support could frustrate users and drive them away if they can’t solve their problems.
Another feature that is very helpful and valuable to users is the ability to check their credit score. After all, their credit score will affect their personal loan terms and repayment options. Integrating a free credit monitoring feature on your loan app will give your users more information and help them better understand their eligibility for a loan.
Adding cryptocurrency features such as a wallet and other crypto buying and selling options is also a popular feature many FinTech apps are including in their services today.
Examples of Money Lending Apps
Let’s go over a few apps that loan money and P2P lending platforms that are popular with consumers to give you an idea about what loan apps look like in practice before you begin the app development process.
This is not a P2P lending platform, but it is a payday advance app. Dave offers users quick access to small amounts of extra cash to help them pay bills, avoid overdraft fees, etc. Users won’t be able to get substantial loans from Dave, but a small loan with a low or non-existent interest rate may be the perfect choice until their next pay period.
This was one of the first P2P lending platforms on the market. Prosper connects lenders with borrowers and automatically suggests loans based on a borrower’s profile information. This platform does not have an app for borrowers, but they do have a mobile website that borrowers can use. Prosper does have an app for prospective lenders to invest in personal loans.
This is another P2P lending platform, but unlike Prosper, Avant has native iOS and Android mobile apps for borrowers to use. They allow them to track payment history, make payments, and get notifications about their account details. Avant also gives its users the option to get a branded credit card for personal use.
This is another cash advance app. Users get matched with lenders who are willing to work with them, and borrowers can get money via direct deposit into their bank account in as little as 24 hours. There are cash limits to payday advances and personal loans. These limits vary based on the borrower’s creditworthiness.
The FinTech sector offers creative entrepreneurs a chance to disrupt the traditional financial systems. One of the popular FinTech trends is apps that loan money. There are many ways to approach this idea, whether you want to connect borrowers and lenders or just offer quick, small cash advances. If you’re having trouble figuring out where to begin, speak with an app development partner. There are a lot of complexities in the creation of a FinTech app that actually transacts money. Take advantage of the industry experience and the technical expertise offered by a partner when you want to create a money lending app.