Peer-to-Peer Lending

Ebay has been great at creating a global marketplace for all kinds of products. Buyer and sellers from all over the world come together to find or sell what they need or have at the prices that both prices agree on – global capitalism at its finest.

Now the same principles are applied in the financial marketplace. We are talking about peer-to-peer financing. It exists under many different models from VirginMoney model, where relatives and friends lend each other small amounts and process paperwork online, to Zopa model, where lenders are bidding on pools of loans grouped by credit scores. There are tonnes of models in between.

While no comprehensive industry information is readily available, we are finding that Zopa has been the most successful so far. Mind you, it appears they have been around the longest. They now operate in UK, US, Japan and Italy.

At the same time different models has been tried State-side as well. You have your Prosper, where lenders bid on actual requests for loans, Lending club, which looks very much like on-line credit union, and even student loans only service Fynanz.

P2P lending services are mushrooming all over the globe, some of them have been spotted even in China, others focus exclusively on microfinance. Strangely enough, the idea hit the roughest patches in Canada, where the first site IOU Central (same model as Prosper) was shut down within weeks of launch.

P2P lending is a definite Existing Alternative to current financial systems. We will be watching it closely, hoping for development of global P2P conglomerates the likes of eBay in the near future.