Update (Jan 2008): Lending Club has improved their referral program. Sign up for Lending Club by following this link and get $25 or read more about it here.
Almost three weeks ago Lending Club quietly launched a referral program inside of Facebook. When logged into your account, there is “invite friends” text and a small cash graphic in the upper right corner on most pages. Clicking on this link sends you to a referral page which explains, “We will deposit $5 in your Lending Club account for each friend you invite who signs up for a basic Lending Club membership (basic memberships are free and there are no obligations).” You must be a Facebook member to join Lending Club and the referral form only permits you to invite your Facebook friends. To prevent spamming you are limited to inviting 10 friends per day. When you select one of your friends to invite they will be sent the following message from you through Facebook, “I found a site I thought would interest you. Lending Club is a p2p lending service: you can be a lender or a borrower, bypass the banks and get better rates.”
About a week after launching the referral program, Lending Club CEO Renaud Laplanche told me, “It seems to be working nicely: daily registered members increased 20% since then, although it’s not obvious how much should be attributed to the referral program.” Nearly 12,000 people have installed the Lending Club application in Facebook.
Lending Club and Prosper both have referral programs, but they are very different. Under the Prosper referral program, which ends August 31st, a borrower must receive a loan and a lender must fund a loan in order for the $25 referral bonus to be paid. This can be a long process and many potential borrowers or lenders will not complete the process even after creating an account. Only a small fraction of the 330,000 registered Prosper members are lenders or borrowers. Lending Club’s bonus, while only $5 instead of $25, is much easier to receive since the new member does not need to actually become a borrower or lender. Although you do not have to immediately commit to becoming an active borrower or lender, the referral program will be very beneficial to Lending Club because all referrals are from people that know each other as Facebook friends.
Of course, the Lending Club referral program would create even more growth if they expand outside of the Facebook social circles. I look forward to adding a referral link on this site, for example. Another way they could significantly increase sign-ups is by paying the person who just signed up. It would be nice if the referral emails said something like, “If you sign up now you will receive a free $5 in your Lending Club account since you were referred by [name].” Having the $5 in their Lending Club account would also provide an incentive for new lenders and borrowers to set up their bank account. PayPal can trace its explosive growth to a $5 referral program where each party received $5 when they signed up. These types of programs are especially popular on college campuses which seem to be the demographic which Lending Club is targeting.
To test drive the referral program, I had one of my Facebook friends sign up for Lending Club. He signed up three days ago. Unlike Prosper, there is no confirmation email that lets you know your friend signed up and they payment is not immediate. I will let you know how long the referral payment takes once I am paid.
Wiseclerk has some good information about referral programs for other peer to peer lending sites including Zopa, Smava and Boober.
Update (Jan 2008): Lending Club has improved their referral program. Sign up for Lending Club by following this link and get $25 or read more about it here.
Update (Oct 2008): Lending Club changed their referral program again.
