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Do We Need a New Name for Peer to Peer Lending?

by Peter Renton on June 24, 2011

This industry is unusual. There has never been a consensus on what to call it. There are four terms that I see used all the time: peer to peer lending, p2p lending, person to person lending and social lending. I have also seen PtP lending and many people confuse it with micro finance and crowd sourcing.

If you look closely at the home pages of Prosper and Lending Club you will notice that there is no mention of any of these terms. Prosper still uses peer to peer lending but not on their home page or their main investment page. On Lending Club you will be hard pressed to find any mention of peer to peer lending (or any of the other terms) at all. It is only in their help section and in old press releases that you will find these terms.

Why? Because none of these terms really describe what these companies do anymore. While the majority (for now) of transactions conducted on these sites are between individuals, on the investment side, as I wrote about earlier this week, the individual is becoming less important. A hedge fund that invests in a loan can hardly be considered a peer to peer transaction.

What Shall We Call This Industry?

This industry is still young enough that if both Prosper and Lending Club supported a new name it would probably stick. But what term should we use?

Lending Club is focusing on the term “Prime Consumer Notes” now on their investing page. But that only describes one side of the transaction. A borrower will certainly not consider their loan a “prime consumer note”. We need something that encompasses both sides of the equations.

Here are a few suggestions I have come up with:

  • Crowd Lending or crowdlending
  • Direct consumer lending
  • Direct lending

What do you think? Do we need a new name here or is peer to peer lending just fine? I would love to hear your suggestions in the comments.

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Ian June 24, 2011 at 1:48 pm

I’m a fan of Direct Consumer Lending (DCL); as you state, it encompasses both sides of the ‘transaction’ and doesn’t have the stigma associated with it that ‘peer-to-peer’ does after the Napster / File sharing fiasco of the late 90s.

Wiseclerk June 24, 2011 at 2:51 pm

True, there are many names and none fit without causing confusion. I never liked ‘social lending’, unless it would be only applied to Kiva and other microlending services. What’s ‘social’ about lending on Prosper or Zopa? Most lenders do it to make a profit.
Crowd lending focuses on the lender side only, equally mispoint as saying crowd borrowing.
Direct consumer lending and direct lending lack the originality to offer disctinction and recognition.

There are several business-models that could be seen as subcategories, e.g.
p2p microfinance
p2p student loans
p2c lending (peer-to-company lending) – is there another, better term for this?
p2p equity / startup financing

I named by blog P2P-Banking and feel that this name that was off-target in the beginning of p2p lending becomes a better fit, able to embrace the ever-evolving new trends and services. The only downside is that it contains the word “banking” and thereby causes association with banks, which most services wanted to overcome and leave behind serving their customers better with new monetary processes.

Ronald Kleverlaan June 25, 2011 at 1:54 am

I prefer crowdbanking or crowdlending.

This makes it easier to compare to other crowdfunding initiatives:
1) Crowdsupporting – donating without reward
2) Crowdfunding – Investing in high-risk initiatives
3) Crowdbanking – lending with interest

Peter Renton June 25, 2011 at 6:22 am

@Ian, I like this one, too. It describes what it is and has no negative connotations.

@Wiseclerk, Points taken. As you say the only downside of p2p-banking is that it has the banking name. But as this spaces evolves more it might become even more accurate. A Lending Club or Prosper checking account anyone?

@Ronald, As I mentioned above the “banking” piece is what Lending Club and Prosper have been trying to move away from. Maybe one day banks and banking will not be viewed in such a negative way as they are today.

Bilgefisher June 27, 2011 at 11:06 am

I think a simple “Multi-source lending” would work. That’s exactly what is happening. It also tells outsiders what it is. I have a multi-source loan or I am multi-source lender.

Jason

Peter Renton June 27, 2011 at 3:04 pm

@Bilgefisher, Not bad at all, I haven’t that idea before. It does encapsulate the essence of what it is, I will be interested to see what the folks at Lending Club and Prosper say.

Matt Jabs July 11, 2011 at 1:17 pm

I like Direct Lending.

Peter Renton July 11, 2011 at 2:12 pm

@Matt, Direct lending would certainly be an option. If Lending Club and Prosper could agree on a name like this I am sure we could all get behind it. Thanks.

Simon Dixon July 19, 2011 at 5:52 am

Funnily enough I just encountered this problem.

I am currently writing a book on banking reform with a few chapters on person to person lending and found myself spending several paragraphs defining names and distinguishing between services.

I dont think many people get peer to peer lending and all the derivations.

Just got back from doing interviews at the institute for social banking summer school and they have a whole new definition of social lending referring to the social impact side.

To me social means Facebook, but it also means micro-finance when you say it slightly differently.

Everybody thinks differently, so what the hell is it?

I watch interestingly at your suggestions.

Simon Dixon

Peter Renton July 19, 2011 at 11:55 am

@Simon, This is the problem. For many people social lending means Kiva or other micro-finance. But Prosper seem to be pushing the social lending term over peer to peer lending these days because they think it can include the institutional investors that way. Lending Club doesn’t like either term.

I think one term will bubble to the surface, right now that term is peer to peer lending. Whether it stays that way or not is anybody’s guess. If Lending Club, Prosper, Zopa, Yes Secure, etc. all got together and said let’s call it say “direct lending” then it would change overnight. But I don’t think that is going to happen.

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