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Peer-to-Peer Lending: No Longer Just a Curiosity
Key Excerpts from Article on Website of Bloomberg Businessweek
Posted: February 5th, 2013
http://www.businessweek.com/articles/2013-01-20/peer-to-peer...
Peer-to-peer lending most immediately brings to mind the largely feel-good act of extending small-time money to small businesses and individuals with quirky projectsa curiosity at best and no threat to the lending hegemony of big banks. Whats less appreciated is how successful peer-to-peer lending platforms such as Prosper and Lending Club have been in connecting wholesale numbers of individual lenders and borrowers. Renaud Laplanche is the founder and chief executive officer of Lending Club, which has been at least doubling its loan originations every year since it started in June 2007 at the onset of the financial crisis. He says he came up with the idea when he realized he was paying 18 percent on his credit-card debt while the issuing bank was paying out 2 percent to depositors. Lending Club mitigates riskits default rate has remained in the low single digits throughout the financial crisisby serving prime and superprime borrowers and turning down 90 percent of loan applications. Prosper, perhaps Lending Clubs main rival, has similarly posted nice risk-adjusted returns across its loan portfolio. Its management and board are studded with venture capitalists and Wall Street names. The value proposition to borrowers, obviously, is access not just to capital that the banks arent willing to lend them, but capital at a lower cost should they make the grade.
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