Your guide to peer to peer lending

Will Banks Join the P2P Lending Party?

by Peter Renton on September 2, 2011

There was an interesting article in the American Bankers Association (ABA) Banking Journal recently discussing p2p lending. I was very curious to see what the bankers take on the industry is now.

While it looks like banks are paying attention they see no threat whatsoever to their business from p2p lending judging by this quote:

The emergence of P2P lenders like Prosper, Lending Club, and Zopa was once thought of as a disruptive force in the financial services industry. However, although Lending Club’s loan volume has been steadily increasing month-over-month for the past year, the $20 million in loan volume it did in June 2011 is a drop in the ocean of overall consumer lending.

I completely agree with that statement – p2p lending has less than 0.1% of the consumer lending market in this country so banks need not worry for now. But if I were a banking executive I would be keeping a close eye on this industry. Why? Because it is growing at around 100% a year and if it maintains that growth rate it will become a large industry in a relatively short time.

The article goes on to validate the concept of p2p lending by encouraging banks to create their own p2p lending platform:

Not only is this not much of a threat to banks’ traditional lending business, there’s really no reason why banking couldn’t create an online lending marketplace of its own. In addition to the organic traffic that lenders could drive to such a site, they could refer to it those loans they decide to pass on themselves. They’d give the option of funding them to those investors and savers looking for higher rates of return than they’d obtain with CDs, by lending money in the marketplace. Banks could easily underprice Lending Club’s processing fee (which ranges from 2.25% to 4.5% of the loan amount), and avoid charging the 1% service charge for each payment received that Lending Club hits investors with.

I have no doubt that banks could undercut Lending Club and Prosper as far as fees go. Not only that but many banks have excellent risk management models when it comes to the kinds of borrowers who use p2p lending. So I imagine it would be a shorter learning curve for them than it has been for Lending Club and Prosper. If a Bank of America or Wells Fargo launched a p2p lending site I think it would be a great thing for the industry. Those investors who have been holding back because p2p lending seemed inherently risky may feel more comfortable with a TBTF bank running the show. I think this would be a tide that would lift all boats and Lending Club and Prosper would benefit as well.

But of course, that is probably not going to happen any time soon. My guess is that banks will continue to ignore p2p lending while they see no impact from it on their bottom line. In reality they probably have five years or so before p2p lending will be large enough to make much of a dent in the massive consumer lending market. In the meantime p2p lending will grow steadily, somewhat under the radar, providing both borrowers and investors with a better deal than they can get at the banks.

When p2p lending is far bigger then the most likely scenario will be for a bank to just go ahead and buy a leading company rather than reinvent the wheel themselves. I can foresee a time before the end of the decade when banks will open their checkbooks and try to snap up any p2p lender they can get their hands on. Hopefully by then we will have many established companies for them to choose from.

Hat tip to Walter for bringing this article to my attention.

{ 35 comments… read them below or add one }

Dan B September 2, 2011 at 1:49 pm

Well the other thing is that there’s no real incentive for banks to do p2p. They already do a variety of loans have access to capital at low to almost zero percent. So why would they launch a business that gives a piece of their profits to consumers. I mean what would be the point.

Peter Renton September 2, 2011 at 2:07 pm

@Dan, There is no point right now. The only reason would be if they start to see a decline in revenue because of p2p lending. Then it would be a defensive move aimed at stopping the decline.

Rob Garcia September 2, 2011 at 4:32 pm

Inevitably… just a matter of time, but they won’t have a pure model, because they can’t realistically get rid of their cost structure, so Lending Club / Prosper will be more competitive.

Peter Renton September 2, 2011 at 5:03 pm

@Rob, Thanks for chiming in, good to hear from you again. I hope your new gig is going well. Most likely a bank would implement a hybrid p2p model if they were starting from scratch but if they bought a company like Lending Club or Prosper they could run it as a separate entity which would keep it more pure so to speak.

Walter September 3, 2011 at 1:24 pm

The banks do not need to fear p2p per se, but they should be very excited at the chance to leverage p2p lending against competitors, especially the bank(s) that purchase(s) an existing p2p lender. That is what I believe will lead to movement in the bank-p2p space earlier rather than later. Banks with the ability to offer these kinds of notes to current and potential customers who are desperate for higher yields will be a tremendous market advantage and this, I believe, will outweigh potential profit loss by the bank owning a p2p platform.

There are plenty of troubled banks that cannot afford to take another hit, and if a bank with p2p lending decided to focus on the market areas of troubled banks with fantastic rates for borrowers and lenders, then the other banks lose twice and those banks are that much closer to acquiescing. A relatively healthy p2p-owning bank can withstand some profit losses if they believe they’ll hurt the competition more than themselves (this is just a variation of the Starbucks strategy). And a bank can market those rates in areas where they might not otherwise have a presence (an area that a bank is looking to move into). Plus, as the article mentions, banks with p2p lending can expand the loan portfolio for risks they might not otherwise take, earning profit they might not otherwise make and letting the individual lenders bear some of the risk.

My opinion is that a bank will be looking to buy LC or Prosper (as opposed to building their own) b/c these p2p lenders will a history behind their returns and because their experience in dealing with the myriad state laws (and the unknown federal regulatory status for this type of investment) and lenders will make it more cost effective. Banks may be able to undercut the p2p lenders on fees, but they will not have the track record or the experience, and that will bring it’s own costs. My guess is that a bank buys a p2p lender and leverages the knowledge it has and its efficiencies to bring down the fee costs, making it tougher for other entrants. Perhaps it’s also better for liability reasons.

The track record will be very important – It’s a much easier sell to CD shoppers on p2p lending when you can tell them that, although there is no FDIC insurance, no one investing in 800+ notes has lost money. They’ll probably be ok with a little fluctuation in yield (and corresponding defaults) as long as rates on other products are so crappy. The banks left to start their own p2p might have a tougher time getting going and it could be a tougher sell for awhile without a history of returns for their own product. Perhaps those banks could point to the rate of returns of their internal lending, but those rates probably won’t be inclusive of the types of borrowers they’ll be seeking with p2p lending. And, as mentioned above, the bank owning an established p2p lender can work to bring the fees down.

I think it’s important to remember that we’re talking about prime borrowers here. p2p constitutes .1% of overall consumer lending, but what percentage of consumer lending do prime borrowers constitute? p2p lending might constitute a significantly larger percentage of the prime borrower market (please correct me if I’m off target here). That’s where bank’s consumer risk modeling will be focused for the foreseeable future.
Of course, given bankers recent track record, it’s also not hard to imagine a p2p lender being purchased only to have them drive it into the ground through sheer ineptitude. Banks that are fearful of this potential competition may buy a p2p lender just to keep it out of the hands of the competition.

Roy S September 3, 2011 at 2:17 pm

“they could refer to it those loans they decide to pass on themselves.” –That just screams, “We think these are bad loans for us to take on our books, but we don’t mind passing off bad loans on to you.” I understand they only have limited capital in which to fund loans themselves, and this could be a reasonable way to diversify their market share of loan origination, but I’m not too sure how I’d feel about this exact scenario.

I’m not sure of the market share of unsecured term loans. If p2p lending were to start to branch out into secured car loans, mortgages, and commercial loans, it might upset the playing field a bit. Overall, I don’t think that p2p lending will ever warrant a serious threat to the banking industry. p2p lending doesn’t offer personal savings and checking accounts or credit and debit cards. Until Prosper and LC begin offering these services (and actually become banks), I don’t see that they will really threaten the larger banks. Unfortunately, I’m of the view that once they become profitable and more established that a bank or other financial institution will buy them. If BAC or WFC buys out Prosper, I will more than likely transfer my funds to LC. If one purchases Prosper and the other purchases LC, then I’ll probably look elsewhere to invest my money. I’m not anti-bank, just anti-BAC and anti-WFC. My detest for (and distrust of) them would end my venture into p2p lending on the spot.

@Walter, re: “there is no FDIC insurance”
While there is no FDIC insurance, it doesn’t mean that banks can’t go ahead and purchase other insurance to guarantee a certain percentage of the loan, similar to PMI. Borrowers may have to pay higher rates (or origination fees) or lenders may receive a lower ROI, but I think having a sense of security similar to FDIC insurance would entice more lenders. They could then offer another subset of loans with greater returns but no insurance similar to how Prosper and LC currently operate.

@Peter, Upon thinking about insuring loans similar to PMI, have you heard or discussed anything of this sort with Prosper and LC. I haven’t heard about this practice within the p2p industry, but I’m wondering whether either has considered it. If they have, I’m wondering whether they are or will be pursuing such an option or their reasons for declining it. Honestly, I haven’t thought about that as option until now, but it would be interesting to hear about their perspective on the subject.

Charlie H September 3, 2011 at 3:26 pm

If the cost of capital for a bank is ~25 basis points, they would not need the Peer part of P2P.

They will have to do something to adress the cost structor. This is especially true since D-F restricts of there more profitable activities.

Louis Lamoureux September 4, 2011 at 7:56 pm

as @charlie says, banks cost of capital is low and don’t forget commercial banks can lever up to 30x. $10 million of capital buys them $300 mil of loans.


Shawn September 4, 2011 at 9:17 pm

But don’t forget that it also works the other way around… if we assume the 30x leverage is true of their capital, then $10 million of deposits diverted from their banks to P2P markets would cost them the ability to loan $300 million… So while deposits have an outsize effect, so then does the loss of deposits to other markets, thus would attract their attention quicker.

Prosper lender “shawnw2″

Charlie H September 5, 2011 at 11:44 am

The P2P market is currently ~30M a month.
If one assumes that every dollar of that would have other wise been invested in a CD or an on demand deposit account, then yes that is costing “the bank” about 300M in lending power.

I don’t think thats a good assumption because I don’t think that P2P is competing with CD or on demand deposit accounts. I think that it is competing for capital with Corporate high yield bonds and non asset backed consumer loan-backed bonds.

Walter September 5, 2011 at 1:58 pm

I do not think p2p lending is competing with CDs yet, but I think it’s certainly a strong possibility (1) as p2p becomes established and (2) with marketing by the p2p owning bank. I think that’s why the track record could be important in this context, especially the 800+ loan number.

On the other hand, as discussed on another thread in this blog, the current LC Investors Agreement states that you cannot have more than 10% of your net worth invested in LC – definitely not a statement that makes one think these loans, even en masse, are CD replacements.

What will be interesting are any shifts in this % over time and/or once acquired. I don’t know how if Prosper is set up in similar fashion. At what point can LC or a bank say, well, hey, this product has been around X years and there’s been no loss of principal when invested in 800+ loans, so this product is worthy to at least be considered as a slightly more risky, but far higher yielding, investment vehicle to be mentioned when a customer comes in/calls asking about CD rates? Or will it be permanently relegated to part of a percentage of the overall investment portfolio, limited by diversification advice or requirements?

Roy S September 5, 2011 at 6:02 pm

I tend to agree with you, Charlie, that investing in LC and Prosper is more akin to investing in high yield bonds, however, what we are investing in is more akin to personal loans. On the one hand, banks aren’t really competing for capital. On the other hand, they are competing on the lending side. I think more than anything, this is a win for the personal loan borrowers since the competition should keep the loan rates down. Unfortunately, I don’t really see there being too much competition for capital for the banks. If I am right on this, then interest rates on CD’s and savings won’t be affected by p2p lending. But I think we could also foresee a general rise in corporate bond rates if p2p lending is competing for fixed income capital. While p2p lending is in its infancy, I am fairly confident that there are a lot of large players in the financial sector keeping a close eye on it as it has the potential to affect large swaths of the finance industry.

Dan B September 5, 2011 at 8:38 pm

I think that one thing that most of us here forget simply because we are here & are p2p investors is the TINY total number of investors that we’re really talking about. This is after 5-6 years in business, an unprecedented & sustained low deposit account interest rate environment & not an inconsiderable amount of publicity/promotions etc.

The recently released GAO report gave a total of a bit over 80,000 from inception. Though technically correct, I think a more accurate distinction would be looking at ACTIVE investors with at least 100 notes or $2500 invested Applying that filter & even disregarding the fact that there are a number of investors who are in both LC & Prosper, I think that you’ll see that 80,000 number come down to under 20,000 investors nationwide………… Perhaps substantially under 20,000.

If you really think about it that is a staggeringly small number………….assuming I’m even close with my guesstimates. Let’s face it, except on p2p blogs, p2p doesn’t normally even make the list of alternative/niche investments.

Bilgefisher September 6, 2011 at 7:47 am

To be honest, I am quite happy with the industry staying somewhat small. If the competition were to increase greatly, you would see interest rates drop accordingly. Many borrowers come to P2P because they have no other alternative or feel they have no other alternative. Why else would anyone willingly take a 30% interest loan in a market of 6-9% loans available. When borrowers have 30 choices for lenders, those lenders will have to have far better bait on the hook.


Peter Renton September 6, 2011 at 10:08 am

Excellent discourse gentlemen. A number of great points have been raised.

@Walter, I have never seen any numbers as to the breakdown of consumer debt by prime/subprime borrower. I did read an article a while ago, though, that said the average prime borrower actually carries more credit card debt than their subprime counterparts presumably because they have high incomes. But as for absolute numbers I have never seen a breakdown. My guess would be that the prime borrower market would be far smaller than the subprime marker.

This 10% limit you mention for an investor net worth is in many alternative investments like p2p lending. I don’t see that changing for many, many years. I don’t see it as a bad thing either. We don’t want p2p lending to get a bad name because a naive investor lost their life savings when they invested $20,000 in one G-rated loan that defaulted.

@Roy, You bring up a great point about some kind of p2p lending insurance. One of the companies in the UK, Ratesetter, offers something like this. It is called a Provision fund and it keeps a certain amount of cash in reserve to compensate investors for loan defaults. This is a pretty new concept but right now they claim it has covered every default. You can read more about it here:
I have not had conversations with Lending Club or Prosper about this but I will certainly mention it to them when I chat with them next.

@Charlie, With a bank’s cost of capital so low and the fact that they can leverage their deposits there is really is little reason for the seem to seek investor money the way Lending Club and Prosper do. But obviously this situation won;t last forever but this is one of the reasons I don’t think there will be much interest from banks any time soon.

@Lou, Is it really still 30x leverage for commercial banks? I thought I read somewhere they reduced that ratio but I could be wrong.

@Shawn, I agree with Charlie in that I don’t think p2p lending is competing much with CD or savings account money. My guess is that most investors are taking money out of the bond or stock markets.

@Dan, Yes you raise that ugly issue again. Your estimates seem accurate to me. So it is probably true that the number of active investors is way less than 0.1% of the investing population. Probably closer to 0.01%. And if it wasn’t growing then I would be very concerned. But every month more new investors come on board as the word spreads albeit very slowly.

@Bilgefisher, I don’t think you have much to worry about in the short term. P2P Lending will remain very small for a number of years I expect. I am not sure, though, that competition will vastly reduce rates. For p2p lending to be successful it has to offer investors competitive returns.

Dan B September 6, 2011 at 12:22 pm

Peter…………….All you said would be true if the number of new investors easily exceeded the number of investors who become inactive, disillusioned, or just move on to the next thing that catches their eye. I’m not saying that we are in that scenario right now, but it is a danger.

I know a number of people here on this blog have high five figures & even 6 figure investments in p2p. But even with us the average non-institutional investor’s balance at Prosper is $3700. At Lending Club it’s $8640.

Now please correct me if I’m wrong but I know if no investment ,(obscure or not, new or old) in the western world today where the average investor has only $3700 invested. In fact you could probably go back 20 years & that statement would still be correct.

Peter Renton September 6, 2011 at 1:54 pm

@Dan, I certainly don’t even pretend to know what the average investor has in all the dozens of investment vehicles available on the planet. But I will say this. Most investors come to p2p lending with an attitude of cautiousness and skepticism. So it makes sense that they start out small and give it a try. Most probably wait 6-12 months or even longer to see how they are doing before making any further decisions on their investments.

You probably saw the quote from Lending Club that said last month their investor inflows were 2x (as in double) their previous record month for inflows. That sounds like positive growth to me.

Look, I have no problems with the low investor averages at these levels as long as they are trending upwards and all evidence suggests that is the case. If we stop seeing investor growth then I will be concerned but everything I see points to the opposite scenario. More people are investing more money in p2p lending every month.

Roy S September 6, 2011 at 2:42 pm

@Dan, The average savings account balance is about the same as the average LC balance you listed–and 1 in 10 people don’t even have a checking account, let alone a savings account. The average HSA balance is under $1,500. Now, what really matters is not so much the average balance but whether there is market demand for the financial product. Obviously, there is currently a demand for this investment vehicle. Whether it remains a viable option in the long run is a good question. Whether there is long-term growth in it also remains to be seen. But to have 1 million investors with $50k apiece is really no different than having 500 institutional investors with $100 million apiece. It is ultimately the entire balance of assets that is important. As the demand increases, money is being pulled from other investment vehicles. It might be small now, and it might never increase beyond a niche investment (or it might even fail), but as long as it is growing the money has to be coming from somewhere. Any financial services company that is ignoring this area because it is a relatively minor player is woefully naive. It would not surprise me to see both LC and Prosper bought up by other companies (not necessarily even by banks) if they are profitable ventures, especially if loan volume increases dramatically, regardless of whether the average individual investor’s balance remains under $10k.

Dan B September 6, 2011 at 4:31 pm

Roy S………..You consider a savings account & a HSA (which I can only assume is a Health Savings account) to be “investments? That’s pretty funny. Why don’t we call those Christmas savings accounts investments as well? I’m sure not a single one of them has a balance over $3700.

Dan B September 6, 2011 at 4:36 pm

Regarding institutional investors………….Prior to worthblanket2 signing up the average institutional investor at Prosper had a whopping $32,700 invested. The average institutional investor at Lending Club had $207,000 invested.

Roy S September 6, 2011 at 4:44 pm

Yes, Dan, I do consider those investments. If you go back to the basic definition, “In Finance investment is putting money into something with the expectation of gain, that upon thorough analysis, has a high degree of security for the principal amount, as well as security of return, within an expected period of time.” Yes, the return is rather paltry at the moment, but I was getting over 3% in my savings account before 2008. At what percentage do you begin to consider something an investment? 5%? 10%? 20%? Do you not consider it to be an investment because you wouldn’t put 20% of your portfolio into a savings account or even 1%? You might be able to invest 7 figure sums, but I don’t think the vast majority of people are capable of doing so. I think a savings account is generally the first investment most people can afford to make. Because that is beneath you given your vast wealth, does not make it any less of an investment for someone with only a 4 or 5 figure net worth.

Roy S September 6, 2011 at 4:53 pm

@Dan, “Prior to worthblanket2 signing up the average institutional investor at Prosper had a whopping $32,700″ How much does the average institutional investor have invested now with worthblanket2 signed on? What happens if 5 more institutional investors sign up with Prosper? You’re looking at a very short past for a very young industry and trying to come to conclusions. You can’t come to any conclusions yet. worthblanket2 might be the largest institutional investor by tens of millions for the next 10 years, or we might be looking at worthblanket2 as you are looking at the average $32,700 for institutional investors prior to worthblanket2 signing up. You don’t know, and you can’t come to any conclusions. We are currently seeing MOM (month over month) increases, you cannot say that will end any more than I can say that it will take off much more dramatically. It is good to have a healthy skepticism, but I think you are coming off more negative than skeptical. I’m just glad that there were people who viewed PC’s as the next big thing even though in 1980′s it was a relative small market. This may be the same. It also may not.

Dan B September 6, 2011 at 7:44 pm

Roy S………….So by your definitions are checking accounts that pay 0.01% an investment ? How about checking accounts that pay nothing? I’m just trying to understand your line of thinking.

And incidentally the only reason I excluded worthblanket2 from my previous statement was because he/she started investing after March 31st, 2011. That date was the cutoff on the GAO figures that I saw recently.

Roy S September 7, 2011 at 10:27 am

@Dan, Unfortunately, I wouldn’t put it past some people to use an interest bearing (and even non-interest bearing) checking account as an investment. Back in the good times when my checking account was paying over 1%, I still didn’t consider it an investment. I only keep in it what I need to pay bills. Savings accounts were set up specifically as an investment option, and I still use my savings account as an investment option. It is my most liquid investment option set up specifically so I would not have to (partially) liquidate other investments in case of an emergency need of cash. So you might consider it less of an investment and more a part of an overall investment strategy. But I stand by my view that it is an investment, especially for lower income/net worth individuals where purchasing bonds and equities are out of reach.

You proved my point that prior to worthblanket2 investing, the average institutional investor was considerably lower than it is now with worthblanket2. If another dozen worthblanket2′s come on board, then the average will continue to rise. You can’t look at the average investor’s portfolio today and say that it will look similar in the future or say that no other investment has such a low average investment per investor to prove any point. It is a relatively new industry which is still trying to prove itself. Currently what is important is that the loan volume is continuing to increase, and investments are continuing to increase. That shows people are continually more willing to take on the risks associated with p2p lending. The trend could easily reverse or grow stagnant, but even then it doesn’t mean that the industry is doomed. It just may remain more of a niche investment. But again, I maintain that with it growing right now, the financial services industry needs to keep an eye on it. Doing otherwise could be a costly mistake.

Peter Renton September 7, 2011 at 10:30 am

@Roy/@Dan, I think we can agree that there is no absolute definition of an investment. Different people will have different takes on it. I have a friend who has never invested in anything other than a money market fund (all in his retirement plan) which is currently earning around 0.05% and he certainly considers that money an investment. Another friend is using his money to invest in alpaca breeding which has had a negative return over the last two years that he has been doing it. But he certainly considers that an investment. Another friend collects poker chips for Vegas casinos and believes they will increase in value one day. Now, I don’t consider any of these things an investment but that is just my opinion.

As for Prosper, in conversations I have had with their management it seems that we will see several more institutional lenders come on board here soon. I have no idea if they will reach worth-blanket2 volume but I think we will continue to see that average number increase substantially.

Dan B September 7, 2011 at 10:57 am

Peter………..Yeah but I’d bet serious money that the alpaca guy has more than $3700 in that venture!
I’m not even going to comment on the poker chips guy…………though if he were to bury it & will it to his great grandchildren some of them might just be worth “several” dollars over face value.

Peter Renton September 7, 2011 at 2:08 pm

@Dan, You’re right. Not sure how much exactly he has put in to the alpacas but I know it is well over $10K.

Roy S September 7, 2011 at 2:25 pm

I would have to disagree with you, Peter. I can’t say I know the entire story behind the alpaca guy, but there are alpaca farms, and he one day might make a lot of money. I wouldn’t invest in that myself but there are a lot of people who invest in those sorts of things. Most probably fail or lose significant amounts of money, but there are the few that actually succeed or provide a nice return. But I would consider that an investment, if he is doing it as an investment and not as a hobby. Perhaps the original definition is still the best, “putting money into something with the expectation of gain.” Of course, there is a fine line between investing and gambling…

It is good to hear that there will be other institutional lenders coming on board. I don’t need p2p lending to take off dramatically to prove itself–it does seem like Dan does need that to be the case. All I really need is a good return for myself and for the platform. I would actually prefer it remain a niche investment. There are too many people out there who I would rather not know about p2p lending, because I think that they would be very capable of hurting it (i.e. deadbeat borrowers) and my returns.

Peter Renton September 8, 2011 at 12:38 pm

@Roy, I think you will get your wish at least for the next few years. People are inherently skeptical about new investments and p2p lending is no exception. I think it will remain a niche investment for many years but one day, probably in a decade or more the light bulb will go off and it will be considered an essential part of every savvy investor’s portfolio.

Walter September 8, 2011 at 8:33 pm

after marinating on the discussion here, perhaps a non-bank would be a more interested suitor. If LC is competing with high-yield or corporate bonds or similar investments, I could see TD Ameritrade being a prime candidate. It’s online already, and it would give their existing customers a unique asset class, and it could bring additional investors into their fold. A few more years and it’d be an easy sell for their affiliated RIAs. Not to mention that it’s a subsidiary of a financial group with bank holdings. How many $25 million lenders do such companies need before they start taking a harder look at this? p2p, at least for prime borrowers, is not an idea that is going to stay small or niche for long, even if we would like to keep it that way.

Peter Renton September 9, 2011 at 11:26 am

@Walter, Good point. It certainly may not be a bank that first becomes interested in p2p lending. A brokerage firm like TD Ameritrade may end up being a better fit. I even see the possibility of someone like Intuit taking an interest. is one of Lending Club’s largest affiliates and they have a rich database of consumer credit information. Of course, there is probably privacy concerns and all sorts of other obstacles with a deal like that. Of course, any interest is probably several years off but it will be interesting to see who comes to the party first.

Walter September 9, 2011 at 5:53 pm

From the Bloomberg investment announcement:
“LendingClub is bolstering sales, marketing and customer support to win business from banks and fend off competition from Prosper Marketplace Inc., another San Francisco-based startup.”

Any idea what its doing to win support (?) from banks?

Also, in related news, it was reported that another small new p2p startup, SoMoLend, which apparently links entrepreneurs with lenders with no anonymity, received “a commitment from an undisclosed bank to provide $1 million in loans to the first SoMoLend borrowers in Ohio, kicking off the new business by year’s end.”|topnews|text|

It appears that banks are beginning to get in on the act even now

Peter Renton September 10, 2011 at 6:41 am

@Walter, I don’t think Lending Club and Prosper are doing much at all to win support from banks, I didn’t read it that way. They are trying to win business from banks and will continue to do so both on the borrower and investor side of the business.

Thanks for the link, I noticed that article in my Google Alerts as well. I have been following SoMoLend for some time now and I have an email out to Candance Klein to discuss her concept and the bank funding. It is curious that a bank has pledged to back the loans right off the bat and I also interested in her unique model that uses social media. I think she will need to be very careful and having identities be completely available on the platform. The idea has potential but is fraught with possible regulatory issues.

Simon Dixon September 19, 2011 at 11:37 am

I think it is only a question of time till P2P becomes an acquisition target for banks.

I hope they stick to there mission to rival banking and dont get blinded by an exit strategy though.

Great article.

Simon Dixon

Peter Renton September 21, 2011 at 5:05 pm

@Simon, Thanks. Right now it looks like the p2p lending firms are focused on their mission more than being an acquisition target. Let’s hope that continues.

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