Teema 14: Review of one of the major IT security risks and suggestion for prevention: investing via P2P platforms


for the topic of this week i will describe risks and mitigation suggestions for one of the Fintech practices : P2P lending platforms.

in short P2P (or Peer-to-peer) lending "is the practice of lending money to individuals or businesses through online services that match lenders with borrowers. Peer-to-peer lending companies often offer their services online, and attempt to operate with lower overhead and provide their services more cheaply than traditional financial institutions. As a result, lenders can earn higher returns compared to savings and investment products offered by banks, while borrowers can borrow money at lower interest rates ... There is the risk of the borrower defaulting on the loans taken out from peer-lending websites." Wiki

Risks associated with this novel way of investing are obvious and numerous:
- in 2018 - collapse of hundreds P2P lending platforms in China - Link
- in 2019 and 2020 - closer to home - following platform collapsed in Europe (and some of them were from Estonia):
- Lendy (UK) collapse
- Kuetzal (Estonia)
- Envestio (Estonia)

Grupeer (latvia) - have not collapsed but stopped payouts to investors and some of the projects seems like fake.

Analysis shows that collapse of these platforms is not so much for IT-connect risks,  but mainly due to the bad business practices of management. Was it outright fraud or just series of bad management decisions - criminal investigations will show.

But what can be done for preventing these cases:

- Europe wide regulations standards adopted and enforced by governments
to be included into these rules:
- technology wise solution that could improve security is - mandatory adoption of block-chain based solution that will prevent backdating and manipulating with data and information supplied to investors by P2P platform
- mandatory separation between Platform operating funds and investor funds - kept in independent escrow-type of account




some good additional reading about P2P investing is here: https://blog.reinvest24.com/interesting-reading/
some good suggestions are also here: https://colminey.com/saving-baltic-crowdfunding/

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