Technological progress not only facilitates various processes, but it significantly alters the manner these processes work in. For starters, it democratizes them by making the necessary information and tools available to the masses. Previously, only a select group would have access to such data, but things are different in the 21st century. And nowhere is this more apparent than in the financial services sector.
The transformation began when online platforms such as E-Trade made stock market investing accessible to everyone. Today, fintech companies such as PeerStreet have started changing the world of investing.
For many years, a bank loan has been the only option for those who wished to start their own business or make a significant purchase. In turn, banks had exclusive access to lucrative debt investments. It was never surprising that they did not want to share their position with anyone else.
However, banks have never been a necessary part of the process as they only function as the middleman. Regular people give them the money the banks later loan out. Presently, PeerStreet is hoping to remove the middleman out of the process using the latest technology.
How does this fintech company mean to achieve their goal?
PeerStreet used the same technology as GoFundMe and Kickstarter to create their investing platform. It has done so using the latest microlending system, which crowdfunds mortgages by dividing standard loans into smaller parts. These can then be purchased by individuals. This way, the investor’s profit is at least 10%, while borrowers get the needed money.
The PeerStreet platform allows a direct connection between borrowers and investors that banks have previously made impossible.
Sophisticated data analytics guide this revolutionary process. The company gets loans from U.S. private lenders and then uses its own AI analytics engine to build a pool of real estate debt investments. Their technology allows PeerStreet to evaluate every loan and provide only high-quality investments. As the next step, the company sells portions of these loans to investors.
However, organizing a pool of loans is not the only function of the PeerStreet platform. It also creates investment portfolios using award-winning Automated Investing technology. With such technology, PeerStreet users may choose their investment criteria, such as loan terms or interest rates. Once there are suitable loans, the user will get notified.
Since peer-to-peer investing is still new in the real estate market, it is not yet widely accessible. Unfortunately, per SEC regulation, only accredited investors may use PeerStreet at the moment. Presently, you need to earn over $200,000 annually or have a net worth of more than $1 million to be considered “an accredited investor.”
However, those who do not fit this description might have a reason to feel hopeful. Crowdfunding marketplace was also an exclusive space before 2015, but four years ago, SEC made it available to non-accredited investors. The rules are still highly strict as you may only invest a limited amount each year. Currently, the number is at $2,000 or 5% of the investor’s yearly income (depending on which amount is more substantial).
Still, that is far more than it once used to be. And the commission’s 2015 decision might signify a change for hopeful PeerStreet users as well. In the future, this revolutionary investing technology could be accessible to everyone.