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

Clueless about what drives p2p

[redelm]

P2P financing is called "disintermediation" and actually has been going on in the finance world for 20+ years as borrowers approach lenders directly, rather than through banks. The commercial paper market. There are problems, mostly around collections and default. Not economically solvable for small loans.

But the very idea ignores what drives P2P: very low costs to the provider of service. Lending money is nothing of the kind -- there's a big default risk. You'd find P2P s3x to be easier!