Your guide to peer to peer lending

Will Facebook Become a Peer to Peer Lender?

by Peter Renton on November 17, 2010

I just saw thisĀ fascinating video that brought up a question I must admit I have never contemplated – will Facebook become a bank? Of course, Facebook will never become another Bank of America with thousands branches, but they could become a Bank 2.0 type bank. The heart of such a “bank” would likely be peer to peer lending.

Peer to peer lending is such a new industry we are still in the wild west days with few of the players anywhere in the world making money. Yet. I always thought that if Lending Club or Prosper really got going and started to eat away at traditional banking loan volume, then one of these banks would snap up these leading social lenders.

But now, there is a second, more tantalizing option. If Facebook were to buy Lending Club or Prosper that would open up the entire world (literally) to peer to peer lending. It makes perfect sense to me. If you want to loan or invest money then who better to start with than your existing social network. It would be easier to fund loans and collections would become easier too. All loan transactions could be automatically posted to your profile. Of course, there would be huge regulatory hurdles (particularly expanding beyond a single country) but the idea may be one whose time has come.

I have no idea whether or not this will ever come to pass, but I expect that both Facebook and peer to peer lending will continue to evolve rapidly. It will be fun to see what happens.

{ 2 comments }

Brett King November 17, 2010 at 9:50 pm

The Facebook Bank video has been floating around for a while, it is an interesting concept, but I don’t believe that Facebook is really interested as yet in this direction. However, their recent tie-ups with PayPal, etc do mean that Facebook and Payments is a likely area they will pursue. It would be interesting to see if Facebook Credits pass over from virtual currency to real world payments capability.

On the issue of peer-to-peer lending, it’s entirely possible. However, the problem with Facebook peer-to-peer is they would have to limit it to geographies. The complications with cross-border lending in this way would be a nightmare. Now, there is a precedent for Facebook rolling out places for specific geographies at a time. However, I don’t think they could scale Facebook peer-to-peer lending, so I tend to think that this will remain specialized for now.

What we might find is that Facebook becomes a platform for rating the credibility of an individual in the social network. Think of eBay’s rating system for auction participants, and translate this to some sort of social credit worthiness…

Brett King
Author – BANK 2.0

peter November 18, 2010 at 12:21 pm

Brett, I appreciate your feedback. It sounds like it might be a longshot for Facebook to become a p2p lender. From what you are saying, it looks like it is more likely that a partnership emerges where one of the big p2p players uses Facebook’s social network to help with credit assessment and possibly collections.

Even so, if something like that emerges it would a huge boost for the industry. Out of the current players Lending Club is the likely candidate considering it started on Facebook. I wonder if they are thinking about something like that down the road.

Peter

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