Risk assessing P2P Platforms – how do you do your due diligence ?

For these relatively new FinTech platforms in the P2P lending space it can be difficult to choose the platform with which one can be comfortable with. 

Why difficult ? 

  1. It’s a relatively new financial “niche”. There is no long term historical evidence of what works, what doesn’t. Financially, it’s considered a “risky” asset class.
  2. The wealth of superficial reviews based on irrelevant criteria (such as  the UI of the platform) rather than the financial adequacy of the business, created only to get the extra money . Promotions, “cash-back” campaign and referral links that are heavily used by these platforms to gain more users have worked well. They brought more investors to the platforms. They also made the promoters earn more money, besides their investment returns. Which is good. But the promoters will promote the platform regardless of its financial adequacy. Some probably have no idea if the platform is financial sound. They would rather jump on the short term gain, rather than the long term probability of losing it all).
  3. Lack of information and formal education in finance. New investors typically do not have the required financial background to get into investments. New FinTech platforms made it ridiculously easy to start doing it. That doesn’t mean the risks aren’t there. That means it’s just easier to get burned. 
  4. Marketing tricks exploiting the human factor. There are many human psychological biases when it comes down to investing.

Then how do you do it ? 

I’ve seen 4 ways to do your due diligence and they are ranked based on the difficulty to approach them / associated cost

1. Learning about these investments and investigate the platforms online

Description – digging into the financial theory and practicalities behind the investment itself as well as the stakeholders involved. Stakeholders should be investigated both as natural living persons (e.g. platform management) as well as legal entities (e.g. the company behind the platform).

Pro – its relatively fast

Con – you cannot fully rely on this info 

Example –  management team, legal records related to the company, technical records (whois, domain), bank accounts

Tip – use checklists and questionnaires that the community relies on, instead of trying to reinvent the “dilligence wheel”. For technical security matters, I rely on the P2P Lending Platform Security Assessment Form version 2.0 (includes link to the questionnaire on Google Sheets)

2. Non-Standardized reviews from other investor-bloggers

Description – other fellow investors have invested in the platform, did their online checks even met with reps from the platform face2face. They will then post about this. This will typically include a referral link to the platform for users to create an account. The reader gets good information and the blogger gets additional income from the referral.

Pro – somebody else did the heavy lifting for you already 

Con – they can be biased because they will benefit from the review (referral link). So they will most likely write the review in a way that will encourage you, the reader, to register with the platform as well, by using their referral link.  

Examples – It is very difficult to assess the trustworthiness of such a post. Examples listed does not mean that the author is biased and should not be trusted. It means that if the article includes a referral link, it is a high likelihood that it is biased and may not give you the real picture. I have personally talked with some of bloggers in the field and had a very good impression of them as people, as investors, as bloggers and i also felt that they can be trusted. But we are talking about risks here and not human appearances.

Tip – look for a disclaimer written by the blogger mentioning his investment status in regards to the platform, look for bad reviews, talk to these bloggers face2face to assess whether they truly believe in their recommendation

3. 3rd party criteria-based objective reviews

Description – investigating the company’s financials or technical setup through an independent 3rd party’s point of view. These 3rd parties perform checks like this on multiple other businesses.

Pro – you get an a standardized and objective view over a platform. Which, in theory, makes it very trustworthy. Leveraging their experience and reputation will give you a cost-effective way to assess a platform. These 3rd will not tarnish their name or risk legal liability to make a platform look good. In other words, they stand to lose more than the short-medium term gain from the platform.

Con – may not easily make you understand if you should invest or not ; niched

Tip – verify if the 3rd party is not any way linked with the platform they are auditing (e.g. the have common owners, they are owned by the same legal entity)


  • Financial Audit Reports by an renowed financial auditing companies, such as EY, KPGM, PwC and others. Mintos , one of the biggest P2P lending platforms in Europe uses EY and posts their reports on the “Investor relations” section of their website. These 3rd party reviews are usually very expensive for a platform, reason why the new ones may lack it.
  • the TORCH report – an independent investor-blogger, Ido Shkedi, rates platforms based on objective and transparent criteria. Ido is the first and only blogger, to the extent of my knowledge, to do this and he named his report TORCH (Transparency, Operations, Risk, Contingencies, and Honesty)
  • IT / Information Security audit reports – in some cases, these are done to aid the Financial Audit Reports, since most operations are tied to an IT infrastructure. In other cases, these can be in the form of a “stamp”, a seal of trust that a 3rd party has used to rate or accept the platforms Information Security posture as acceptable. A good cost-effective example is the UK-government backed Cyber Essentials. Another example is security assessments from independent consultants.

4. Face2face due dilligence

Description – instead of relying on others opinion (2) you do it yourself. Instead of just stopping on the online step (1), you dig deeper into the financial proofs, stakeholders and overall setup.

Pro –  you cannot get a better picture of what’s happening other than seeing for yourself

Con – there is a high cost for doing this and is not really doable for most new investors.

A big cost is that of time and money. This includes travel expenses visiting the platform office and any other site relevant to it, conducting face2face interviews, spending time working in the platforms office to get a feel of how the company is operating from the inside.

Another side of the “cost” is knowledge. You need to know what you are talking about and more important. This requires medium to advanced knowledge in financial, technical, communication aspects.

Without this knowledge, the time and money cost mentioned previously would almost be worthless


  • A good inspiration for how to conduct your face2face general interviews with a platform are other investor-bloggers that do it. Georg from CrowdlendingRocks has very good articles sharing how he does it.
  • In case of Information Security and technical matters related to security, I rely on the P2P Lending Platform Security Assessment Form version 2.0 (includes link to the questionnaire on Google Sheets). I simply use it as a checklist, both for verification via email but also face2face.

Conducting face2face due dilligence is not the silver bullet though. Even you as a human will be biased and are prone to blind spots. Ideally, I would always go for assessing a platform by verifying 3rd party criteria-based objective reviews before initially investing and by doing a face2face due diligence before increasing the invested funds above a certain threshold.