New business models will emerge – Peer-to-peer lending

New business models will emerge – Peer-to-peer lending

Will peer-to-peer lending disrupt traditional banks

Banks are changing dramatically amid an avalanche of regulatory change and widespread debt reduction. But this is not the only disruption which banks are experiencing: The peer-to-peer lending sector is growing fast.

Less than a decade ago peer-to-peer lending started with the founding of Lending Club, Prosper Marketplace, Zopa etc. – a service that would in a very personal way link would-be borrowers with individual lenders and bypass the banking industry.

Peer-to-peer lending essentially matches up consumers interested in a loan with investors willing to lend to them. Depending on the score of a loan applicant, they’ll be issued an interest rate for their loan and then potential investors are given the opportunity to gauge whether or not they consider the loan a worthwhile risk. The applicants with the lowest credit scores are dealt the highest interest rates, though these rates are often much lower than what an applicant is already paying.



People who’ve turned to peer-to-peer lenders in a bid to get a better rate on their savings have been given the the thumbs up by savers, new Which? research can reveal.

And  now institutional investors are tripping over themselves to buy so-called peer-to-peer loans offered by internet  lending companies, a development that could transform the nascent sector into significant player in the credit markets. The influx of institutional money is enabling online lenders to offer far more loans and compete more directly with traditional banks.

Will peer-to-peer lending disrupt traditional banks?


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About The Author

Torben Rick

Experienced senior executive, both at a strategic and operational level, with strong track record in developing, driving and managing business improvement, development and change management. International experience from management positions in Denmark, Germany, Switzerland and United Kingdom

Blog Comments

Great post. Peer to Peer Lending is definitely taking banking by storm.

Savers in the UK and around the world have desperately needed competition for their high street banks and they are finally getting it in the form of peer to peer lending websites.

The lack of regulation has enabled people to come together to bypass the banks and share the benefits.

I believe it’s a great example of protecting the consumer through competition rather than regulation.

Good to see some positive feedback on peer to peer lending. I just thought I’d write a quick note introducing the peer to peer lender I work for, RateSetter. We launched in October 2010 and pioneered the use of a Provision Fund to protect lenders against bad debt. It is this system that has ensured that every single one of our lenders has received every single penny of capital and interest expected. Recently the sector in the UK has been selected to become a regulated sector within the finance industry. This is great news for the sector as it will build trust in consumers. Slowly but surely word is spreading about the attractive rates for savers, and low APRs for borrowers. With government approval and official regulation however, the sky is the limit. Expect to see some serious growth in this sector over the next few years. Also, it’s worth noting Funding Circle who do (peer to peer lending to businesses) have recently been covered in the Finanical Times for doing a deal with Santander. Clearly the banks are taking interest in this exciting and growing sector.

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