Abstract
What if a community bank accepted funds from local residents and, at only a
small premium, lend that money to other community members, while managing
those loans and ensuring the original funders were repaid with interest?
Oh, WAIT!! It' s happening and it' s being done, not by banks, but by P2P
lending web sites.
Ownership of Community-Level Lending Being Claimed by P2P Lenders
Peer to Peer or Person-to-Person (P2P) lending is the most exciting new
entrant in the financial services marketplace since the invention of money.
With banks paying 3% on savings accounts and collecting 13% on credit card
balances, Internet entrepreneurs saw an enormous opportunity in that 10%
interest spread. By disintermediating bankers and moving borrowing online, P2P
lending is predicated on the premise that a channel for lower cost funding can
also generate a higher rate of return for citizen lenders.
Person-to-Person (P2) Lending fulfills multiple needs as both a capitalist and
social phenomenon. As with other new payment and lending channels, P2P lending
is refining its distribution, delivery and collections mechanisms and while
its kinks are by no means ironed out, P2P has about it an air of inevitability
and profitability.
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