What’s attributing to this business model’s success and popularity?
Investors have been able to turn a profit from debt-related investments like asset-backed securities and bonds for decades and borrowers have had access to personal loans and credit for even longer. So why P2P?
The answer may lie in disintermediation, or the removal of various layers and players who receive a cut of the profit from the loan itself. In other words, P2P loans help cut out the middleman.
- Near the end of 2013, the five major P2P lending Platforms (Lending Club, Prosper, Funding Circle, RateSetter and Zopa) had nearly $3.5 billion in outstanding loans, although this is a small portion of the money that moves in the lending market it shows great growth potential for these platforms in the future.
- In the article, Steven Richmond does a good job of clearly explaining the basic principles of peer-to-peer lending. Explaining how everyday people now have the opportunity to invest in loans and act as a bank.
- It was interesting to read about the reliability of "soft information" when selecting loan. Soft information is an umbrella term that encompasses data not readily available in credit reports such as why the person needs the loan, their demographics, and the financial characteristics of the borrower’s social network and physical neighbors.