Comments on: Person to Person Lending: Disruptive Idea

By: investiledysfunction » Blog Archive » P2P Lending Breaks Even. Loanio Enters and Zopa Leaves.

Wed, 15 Oct 2008 14:23:03 +0000

[…] a big fan of P2P lending as my prior post on the topic will demonstrate and so I keep abreast of developments in this arena especially as I […]

By: Anand Sanwal

Anand Sanwal — Tue, 27 May 2008 21:48:03 +0000

Sean and Tim - Thanks for both of your comments.

Sean - Glad to see someone else who shares my enthusiasm for the model.

Tim - Scale will be an issue as you mentioned, but I do think the question is more of when the scale will come than if it will come.

If one of the big financial services players jumps into this space and lends it credence through its brand and risk competencies, it will really turbocharge the growth of these platforms. That will require a significant level of comfort with the unknown so it will require a fairly bold financial services company to do this.

Of course, like most things, time will tell.

By: Sean

Sean — Tue, 27 May 2008 20:36:34 +0000

Thank you for writing this great post. I’ve been meaning to write something similar for months but it just never got to the top of the ‘to blog about’ list (trust me very little science in my prioritization algorithm!) Now if I come up with something worthwhile to add, I can build on top of your foundation.

I agree P2P lending will (eventually) be a paradigm-changer in banking. Lots of execution issues for sure, and path-dependency will matter (in terms of who profits) but the main reason I think this has fundamental legs is that in many ways it is a ‘back-to-the-future’ business model: a credit union for the 21st century. ie A credit union but without the (significant) limiting constraints of the original model.

By: Tim Bauer

Tim Bauer — Thu, 22 May 2008 20:54:50 +0000

I’ll ponder this more Anand but my short take is two things:

1. Uncertainty is more clearly seen (and managed) in smaller chunks. As you get larger (ala Visa, Mastercard, etc) you have to rollup the decisions to higher levels. So, P2P could enable smaller sets of uncertainty (at an investor level) which should drive a tighter margin (less slop).

2. Scale will be difficult. This will be similar to the casino for people for awhile. They will bet a few hundred bucks but scaling to larger chunks of their disposal income will require notable leaps of faith. To your point the processes could evolve to enable the larger leaps of faith (a deeper and deeper disclosure/relationship between investor and investee) … if so … scale might happen. Otherwise it stays a casino … but that is a large industry and the the P2P casino pays WAY better than slots if you aren’t an idiot.

Recreational investing … comes to mind as well.

Still … let me think on it a bit.