Why crowdfunding platforms should use a loan management system
Whether your company provides peer-to-peer(P2P) lending, debt securities crowdfunding, or any other crowdfunding lending products, you should most likely be using a loan management system (LMS). In 2020, the number of funds raised worldwide through crowdfunding amounted to $34 billion (Fundly), and the market is projected to grow by 13.86% in 2021 (Technavio). Using an LMS can enable your company to take your crowdfunding products to the next level in terms of opportunities for growth.
“Crowdfunding platforms are growing in popularity and becoming a general market trend. So should the core technology running the business. It should be easily available, promote a fast time to market and be financially appealing,” says FIS.solutions CEO Armands Liseks.
“At FIS.solutions we had an opportunity to work together with a few market players to develop an SaaS loan and investment management system specifically dedicated to crowdfunding operations. It offers unseen customisation opportunities that match the unique nuances offered by each individual platform,” says Liseks.
When it comes to crowdfunding lending products, according to Transparency Market Research, the P2P lending market is expected to grow significantly to be valued at $1.14trn (£1trn) by 2031 globally (Peer2Peer Finance News, Selin Bucak).
What is a loan management system?
An LMS is a lending solution that facilitates end-to-end lending processes for both online and offline operations. A full lending lifecycle management system enables lending processes to be fully automated, from customer onboarding through to loan origination, loan servicing, collateral management, warnings and debt collection.
Crowdfunding LMS product features
Keep your company’s future expansion in mind and choose a loan management solution that can facilitate a broad variety of crowdfunding services. An LMS should allow you to easily onboard both investors and fundraisers, create fundraising campaigns defining loan conditions, investor returns and platform fees, as well as, provide all the relevant information about the investment opportunity and the collateral for secured investments. Here are the crowdfunding specific features you should expect your LMS to cover:
1. Setup customisation
When setting up a new crowdfunding project , it’s crucial for your company to be able to customise the LMS features to fit your business model. The system should support product setup where you can define specific loan conditions, investor returns and platform fees. If you’re using a no-code or low-code system, such customisation options shouldn’t require any additional IT assistance.
2. Wallet module
Any LMS catering to crowdfunding loans should include a wallet module containing general ledgers that track all transactions conducted using the product. All movement of funds should be clear and comprehensible for both your employees and investors. The module features should show when an investor tops up their wallet and when they withdraw money, as well as which part of their funds goes to the fundraiser and how much the fundraiser pays in platform fees and interest.
3. EMI integration
Depending on your area of operations and type of licence, your company’s crowdfunding lending product most likely requires integration with an electronic money institution (EMI). While your platform administers the wallet, there may be requirements to store the money itself in an EMI. Your LMS will need to be able to easily integrate your investors’ wallets with the necessary EMI via an application programming interface (API).
The dashboard is a crucial component of any LMS solution. It enables your investors to generate reports that provide a comprehensive overview of all incoming and outgoing payments. These reports should show investments made, interest received or accrued, funds available, detail any fees, and show any late payments. The LMS should also generate annual income statements for investors, which would be required for tax purposes.
5. Secondary market
In the crowdfunding market there are sometimes cases where investors want to sell their complete or partial investment before the investment closing date. Any crowdfunding-oriented LMS should be able to accommodate this secondary market. Features should include the option for investors to sell their investment at a discount or premium, as well as the option to accept offer terms from other investors.
6. Investor data
A very important part of the onboarding process is conducting know your customer (KYC) and anti-money laundering (AML) analysis. Your company’s clients can’t legally invest and withdraw money using your crowdfunding product without completing these checks. A great feature any LMS should have is the ability to renew this data after a pre-defined time period.
7. Asset management
If your crowdfunding product supports asset-backed fundraising, your LMS solution should definitely include features for managing all processes involved. The system should enable your employees to manage assets by tracking asset valuation/re-valuation, insurance, as well as connect via API to any related third-party registers.
8. Additional features
Some additional features you may want to look for when choosing an LMS for your crowdfunding needs include an option to acquire new customers by integrating with brokers and affiliate networks. This feature can be further streamlined into a white-label website or mobile application with a predefined customer journey, including multiple company representative onboarding, as well as ready customer self service portal. Another great built-in feature is the ability to easily carry out refer-a-friend and other loyalty campaigns that help grow your business.
For over 10 years FIS.solutions has been supporting the consumer finance industry, fintech companies, and banks with an out-of-the box, yet fully customisable loan management system. On top of the core system, the company also delivers system integration services and custom feature development. FIS.solutions has executed hundreds of projects with more than 50 global clients across a variety of sectors.
The loan management system caters to both secured and unsecured business and retail loans, including instalment loans, auto leasing, mortgages, line of credit, buy-now-pay-later, payday loans, invoice factoring and more.