Can Peer-To-Peer Finance Work?

Dotnaught writes "Two companies, Prosper and Zopa, appear to be convinced that social networking can be combined with borrowing and lending. They're intent on using eBay as a model for listing and bidding on loans without the involvement of a bank. Call it peer-to-peer finance. There are already some 800 groups on Prosper ready to loan money to specific causes, such as the Apple User Group, 'a lending group for those wishing to purchase either a Macintosh or Apple iPod.'"

Comments

If only you can book those loans as revenue...

[Anonymous Coward]

that's how Enron worked.

• CEO makes new subsidiary -
• parent and subsidiary loan each other a couple billion - book them as revenue
• profit
• go to jail

I for one,,

[SauroNlord]

I, for one welcome our p2p lending overlords.

Re:I wouldn't want

[foundme]

I think this P2P Finance will only work if P2P Muscle is also implemented at the same time.

Imagine if you can log on to BeatTorrent, hook up with a few peers living near your debtor, and get them to show your debtor some muscles.

Re:Existing Finance

[cinnamoninja]

I can't imagine how this is able to compete with existing financial providers.

Yay, venture capitalists!

First of all, how many bad debts can these peers handle? Large corporations have enough cash to handle bad or delayed debts.

They are trying to spread risks around. They also are assuming a 4% default rate. I don't know if that is a feasible goal, but they are claiming that the "community" they are building, combined with off-line credit inquiries, will get them to that number.

Unlike other successful P2P services, this model is entering a market where existing businesses are making a living out of it.

In theory, they could take away a lot of bureaucracry, and do it cheaper. In practice, it looks like they are attracting crazy investors, who don't trust banks. (I suppose this is better than putting money under the mattress?) Here's a fun quote from the article:

"I am fascinated by the concept, [and] hate big corporate banks..." writes one user. Such sentiment baffles the more commerce-minded forum participants, who have posted complaints about Zopa's "uncompetitive" returns to lenders.

Hey, if you can find the people who prefer more risk for less return, why not take advantage of them?

Re:Existing Finance

[iminplaya]

But it's a credit union using a computer (patent pending).

It's a great idea!

[Marsmensch]

I have personally invested a hefty sum in a Nigerian financial institution run by the daughter of the country's former minister of finance. She contacted me personally (what banks can match that kind of personalized service?) and personally arranged for my account. I sent her my retirement savings and she will soon start sending me my massive returns. I will soon be rolling in obsene amounts of money!

Nigeria is the future of finance I tell you!

Re:Existing Finance

[Anonymous Coward]

>I know a girl

You lost me there.

new fraud model?

[Anonymous Coward]

Has anyone patented the concept of a Peeramid-to-Peeramid scheme yet?