P2P Banking
Exchanges where peers can lend and borrow money from each other, without the intermediary of banks.
See also the entry on P2P Exchanges
Description
From the Wikipedia:
"Peer-to-peer banking is an online system that allows individual members to complete financial transactions with one another by using an auction style process that lets members offer loans for a specific amount and at a specific rate. Buyers have the option to look for an amount and rate of interest that meets their needs.
All members are categorized by their risk level. Members can browse for other people based on various demographic information.
Since P2P banking does not use third party banking institution intermediaries the rates and terms are often much more favourable for the members.
Unlike conventional banking where the spread between deposit rates and lending rates are consumed to finance the bank's administrative and logistic expenses, both lenders and borrowers get to save such costs, while paying certain commission to the P2P portal provider and/or the credit rating agency." (http://en.wikipedia.org/wiki/Peer-to-peer_banking)
Examples
See also Kiva and Moneytwins
Commentary
From a banking/business commentator at http://bankervision.typepad.com/bankervision/2006/09/peerless_bankin.html
"what will determine the success of P2P is whether they can recruit enough sophisticated investors to fund their loans. According to this report, only about 30% of loans get funded at present on Proper.com. And it does demand a sophisticated investor: practically everyone I've spoken to - incredibly, this includes some bankers are well - fail to understand that Prosper and Zopa are just like banks in that they enable risk to spread across a portfolio.
In other words, the thing that has to be determined is if there are enough people with money to spare, an understanding of the economics of risk, and a willingness to try an innovative model to make the whole P2P thing fly.
Because if borrowers find their loans aren't getting funded, sooner or later they'll stop asking for loans." (http://bankervision.typepad.com/bankervision/2006/09/peerless_bankin.html)
P2P Lending as a Threat to Conventional Bank Institutions
Swiss Private Banker: P2P Lending a Threat to Bank Balance Sheets:
In an video interview in June, Konrad Hummler, managing partner at Swiss Bank Wegelin & Co, states how he sees p2p lending as a threat to banks. P2P lending services could replace vital functions of banks. He says government influenced major banks are too inefficient. Established institutions will use calls for regulation to protect their business against newcomers.
(The interview is in German language)
More Information
- 3-part commentary on peerless banking at http://profitdesk.com/content/2006/08/09/peerless-banking-part-1/
- http://P2P-Banking.com/ Publishes information on p2p lending services and p2p microfinance
- Ripple is an example of peer-to-peer banking.
- See Peer-To-Peer banking for an article in Dutch.
For updates, see the P2P-Banking tag at Delicious