CommunityLend blog

A good update on p2p lending over at Bankrate.

Chris Larsen (Prosper) speaks about the current opportunity, in context of the US credit shifts.

Peer-to-peer lending grows in bad economy (Page 1 of 2)

“Home equity used to be the cash management tool for the credit-worthy borrower, and that has really, really dried up,” says Chris Larsen, CEO at Prosper. “In many ways, Prosper’s three-year, $25,000 loan is a pretty good proxy for what people were using home equity for — improving their home, starting a sole proprietorship, college costs and certainly for replacing credit card debt.

“On the return side, people that are getting 3 percent if they’re lucky (can find) it’s pretty easy to get returns that might range from 5 percent to 11 percent (on Prosper).”

The notion of p2p lending to pay off locked in credit card debt is a powerful one, whose time has come. Javelin have a new estimate on the size of that market:

Mark Schwanhausser, a financial services analyst at Javelin Strategy & Research, says their study shows that credit card debt is the main reason people want to engage in P2P lending. “We’re forecasting that P2P lending specifically for credit card balances will grow from $38 billion in 2007 to $159 billion by 2012.”

The author, Laura Bruce has shifted to being more bullish on the p2p lending space now.

It’s been little more than a year and a half since I last wrote about P2P. See the previous article, “Person-to-person lending: High return, but risky?” for a look at how P2P generally works.

The regulatory issues are laid out from the perspective of Zopa with quotes from Doug Dolton.

“Making a loan requires pretty much a bank license,” Dolton says. “You’ve seen both Prosper and Lending Club change their models because of that issue; they both now use Web Bank to make loans. But then on the other side, you have lenders investing. Our read on the U.S. regulatory situation was that it was a security. We couldn’t see any way around it. You needed to be registered with the Securities and Exchange Commission and all of the issues that brings on.”

Lastly, some stats are included on the increased growth rates at Prosper & lending club, and a reference to Bankrates chart (pdf) summarising the US players.

Zopa in the US have an interesting model that allows members to purchase Credit Union issued CD’s (GIC in Canada) and share their high rate interest with borrowers they would like to help. In a relatively short time, they have achieved 10,000 members.

It was originally expected that the investors in CD’s would be helping family or friends, however, from the tone of this article, it suggests this assistance might be beyond that.

Finextra: Zopa reports 10,000 US members

“We’ve been very pleasantly surprised at how quickly our borrowers have been able to encourage others to invest in Zopa CDs in order to enjoy a negative effective rate on their Zopa Loan,” added Dolton. “In today’s challenging economic climate, seeing how Zopa has enabled borrowers to save significant amounts on their loan payments is very satisfying.

Congratulations to Zopa (UK, US, Italy, and Japan – P2P lending) on winning the award ahead of an impressive list of runners-up including PayPal, Wal-Mart, Vodafone and Prosper. The awards were run as part of the 26th Retail Banker International Forum 2008 event.

Banking News | Zopa most threatening non-bank competitor

Zopa beats PayPal, Wal-Mart, Vodafone and Prosper as the biggest threat to banks across the world.

Social lending pioneer Zopa (uk.zopa.com) is delighted to announce it has just scooped a major international award from the retail banking industry by being voted as their “Most threatening non-bank competitor”.