The global peer-to-peer (P2P) payments market is projected to grow from $1.8 trillion in 2022 to over $3 trillion by 2027, according to Juniper Research. Driving this is a revolution in lending technologies utilizing artificial intelligence to expand access to affordable credit globally while minimizing defaults through prudent decision-making models.
P2P payment models
P2P transactions allow direct value exchanges between counterparties without intermediating third parties, saving time and costs. Payment models include:
- Remittances – Cross-border wage and family transfers
- P2P Apps – Tools like PayPal, CashApp, and Venmo facilitate money transfers via linked accounts or cards.
- Marketplaces – eBay, and Etsy allow buyers to directly pay independent sellers selling goods/services.
- Cryptocurrency networks – Allow direct peer transactions in crypto assets via apps connecting digital wallets.
Across models, users link bank accounts or cards to transfer fiat currencies. However, settlement take days with limited transparency. High dispute rates also plague certain models. This is where AI innovation comes in to transform reliability and access.
AI transforming P2P lending
Global P2P lending is projected to reach nearly $1 trillion by 2027. Platforms directly match lenders and borrowers via online loan listings, bypassing conventional banks to provide cheaper, faster credit access. AI drives key innovations:
- Credit risk modeling – ML algorithms data-mine thousands of attributes to score creditworthiness for faster approvals at lower rates. Factoring wider behavioral signals beyond financial histories helps approve those denied elsewhere.
- Fraud prediction – Unsupervised learning detects abnormal spikes in loan applications or suspicious digital footprints indicative of fraud risks.
- Process automation – Chatbots, document recognition software, etc speed up onboarding and servicing while minimizing errors and costs. Bots also provide personalized financial advice.
- Collections management – Predictive models determine optimal outreach strategies for recovering distressed loans based on consumer psychographic analytics.
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Boosting financial inclusionÂ
AI-enabled P2P lending grants credit access to over 190 million unbanked and underbanked individuals in the alone who struggle with insufficient credit histories or high denial rates. Broader applications like decentralized micro-lending via blockchain networks overcome educational barriers and intermediary costs hampering finance access across disadvantaged demographics globally.
For example, the 0x Protocol allows direct issuance of ERC-20 subtokens by borrowers to creditors holding lien interests redeemable upon repayment – programmatically enforced by smart contracts across borders absent credit bureaus. Such peer trust networks bootstrap credit ecosystems from the ground up, unlocking grassroots economic amplifiers to help communities build intergenerational wealth. The immutable transparency of underlying distributed ledgers builds accountability and access. AI and its fusion with blockchain infrastructure plays a key role in shaping this future by improving access, speed, and reliability.
