Back in 2001, five years before Prosper launched, Eliot Van Buskirk a senior CNET editor wrote an article about "wild and crazy" peer to peer ideas. Napster and music sharing was what everyone thought of when you mentioned p2p but people were begining to expand on the power behind interacting with peers. Buskirk titled the article My Pinko Commie P2P Notions and wrote, "Just because this architecture has made inroads in the area of music sharing doesn't mean that it can't be used for all kinds of other things. I've come up with a few wild and crazy ideas of my own for using peer-to-peer technology to replace everything from our electricity grid to the bank system. While some of these schemes are more plausible than others, they all demonstrate how powerful the concept of P2P really is. Shockingly, all of these ideas are (gasp) very, very communistic in nature, which might say something about where technology's taking us."
After p2p cell phones, p2p electricity and others he unveils p2p banking:
P2P banking
It's fairly common knowledge that the money in our bank accounts isn't sitting in some vault somewhere. Banks make money by loaning your money out to other businesses and individuals at a higher interest rate than they give you for loaning your savings to them. Instead of using a centralized lending service to transfer money from investors to borrowers, a P2P network in this capacity would directly match up chunks of money with chunks of debt, minus the bank part of the equation. Borrowers would run a node specifying how much money they need, for how long, and at what interest rate. Similarly, investors would tell their software how much they want to lend, for how long, and at what rate. Even though the likelihood of a one-to-one match between an investor and a borrower would be very small, the system would be able to work out complex arrangements to make the whole thing add up. Borrowers might be loaning from 50 different people at 50 different rates that work out to be exactly the deal they're looking for when all the rates are averaged. Likewise, investors might be lending their money to 500 different borrowers at 500 different rates that average out to the figure they specified. The P2P architecture could supplant the banking industry as we know it, with money flowing more efficiently between borrowers and lenders. Banks would no longer be able to charge tolls on money as it passed through their system.
Well, not too bad. I'd say he predicted the p2p lending market pretty well.
(CNET article found via Buskirk's comment on TechCrunch article - P2P Loans GainingTraction. Lending Club Goes Nationwide)
Showing posts with label online banking. Show all posts
Showing posts with label online banking. Show all posts
50 best websites of 2007 - Prosper scores again
Last year, Time Magazine named Prosper Marketplace the #1 website of the year. Not in the top 25, or the top 50 but the #1 website of the year. This was a remarkable accomplishment. It beat out heavyweights like Google Calendar and Newsvine. This was Time's brief description of Prosper last year:
"The idea behind Prosper is a bit unusual today, but, as the site reminds readers, person-to-person lending—loans without a financial intermediary—has been around since 300 A.D. For those more used to the Internet age, think of it as eBay meets your neighborhood bank. Prosper is an online marketplace that allows lenders and borrowers to bid for loans—with fees and rates than can be much lower than those of a lending institution. Prosper uses credit scores to help its users gauge the risks of their deals, and easy-to-follow instructions on the site help clarify the details."
Time just released their list of the 50 best websites of 2007 which represent their choice of "the best examples of what's new and exciting about the Web right now...sites with exceptional style and smarts, sites that offer new and improved ways to access and share content, generate our own and otherwise enrich the online (and off-line) experience." Prosper was named one of the 50 best websites of 2007. Here is Time's review this year:
"Prosper is a community of lenders and borrowers—or social lending network—operates outside of any bank, so the rates are better. Post a request for a loan, including desired amount and the maximum interest rate you'd be willing to pay; potential lenders place bids for the amount they are willing to lend, and at what rate. Prosper combines the best offers and puts together a loan plan (multiple lenders, lower risk) and manages the repayment over three years (the standard term). The site also does credit checks, and charges transaction fees and servicing fees.
Prosper loans are not secured by collateral, but the loan agreements are legally binding. You can join a group to get the benefit of that group's positive payment history; as a member of a group, your timely payments help improve the group's overall rep, and that can lead to lower rates for everybody. There are loads of rules for borrowers and lenders—members are forbidden to arrange loans outside the Prosper marketplace, for example—and violations can get you booted. Zopa based in the U.K., operates along similar lines (and its site has prettier graphics) but its network is not as big as Prosper's, which boasts more than 300,000 members and nearly $66 million in active loans. Also worth noting: CircleLending which helps manage private loans between relatives and friends."
In addition, I was surprised to find online banking company ING Direct on the list. Here is Time's description:
"The best bank accounts these days are online, according to the personal finance gurus. And ING Direct's no-fee, no-minimum deposit, federally-insured accounts are a snap to set up; it took us about eight minutes to complete the online forms, then another five to set up the security tools. (Under the privacy policy, the default setting directs ING not to share personal information with marketers—nice.) The basic Orange savings account pays 4.5% interest (better than most offers you'll find at traditional banks) and you can transfer money back and forth from any other checking account at any other bank at no charge. An ING paperless checking account also pays interest—4%—which is practically unheard for an account that requires no minimum balance. It sure beats the .8% we're getting at Citibank."
"The idea behind Prosper is a bit unusual today, but, as the site reminds readers, person-to-person lending—loans without a financial intermediary—has been around since 300 A.D. For those more used to the Internet age, think of it as eBay meets your neighborhood bank. Prosper is an online marketplace that allows lenders and borrowers to bid for loans—with fees and rates than can be much lower than those of a lending institution. Prosper uses credit scores to help its users gauge the risks of their deals, and easy-to-follow instructions on the site help clarify the details."
Time just released their list of the 50 best websites of 2007 which represent their choice of "the best examples of what's new and exciting about the Web right now...sites with exceptional style and smarts, sites that offer new and improved ways to access and share content, generate our own and otherwise enrich the online (and off-line) experience." Prosper was named one of the 50 best websites of 2007. Here is Time's review this year:
"Prosper is a community of lenders and borrowers—or social lending network—operates outside of any bank, so the rates are better. Post a request for a loan, including desired amount and the maximum interest rate you'd be willing to pay; potential lenders place bids for the amount they are willing to lend, and at what rate. Prosper combines the best offers and puts together a loan plan (multiple lenders, lower risk) and manages the repayment over three years (the standard term). The site also does credit checks, and charges transaction fees and servicing fees.
Prosper loans are not secured by collateral, but the loan agreements are legally binding. You can join a group to get the benefit of that group's positive payment history; as a member of a group, your timely payments help improve the group's overall rep, and that can lead to lower rates for everybody. There are loads of rules for borrowers and lenders—members are forbidden to arrange loans outside the Prosper marketplace, for example—and violations can get you booted. Zopa based in the U.K., operates along similar lines (and its site has prettier graphics) but its network is not as big as Prosper's, which boasts more than 300,000 members and nearly $66 million in active loans. Also worth noting: CircleLending which helps manage private loans between relatives and friends."
In addition, I was surprised to find online banking company ING Direct on the list. Here is Time's description:
"The best bank accounts these days are online, according to the personal finance gurus. And ING Direct's no-fee, no-minimum deposit, federally-insured accounts are a snap to set up; it took us about eight minutes to complete the online forms, then another five to set up the security tools. (Under the privacy policy, the default setting directs ING not to share personal information with marketers—nice.) The basic Orange savings account pays 4.5% interest (better than most offers you'll find at traditional banks) and you can transfer money back and forth from any other checking account at any other bank at no charge. An ING paperless checking account also pays interest—4%—which is practically unheard for an account that requires no minimum balance. It sure beats the .8% we're getting at Citibank."
Prosper has experienced incredible growth over the last year. They have over $70 million in loans. Few competitors have emerged. Lending Club just barely launched a few weeks ago and Zopa has yet to move to the United States. CircleLending targets a different demographic - loans between people who actually know each other. Prosper is growing but will it catch on? I find it somewhat surprising that ING Direct, an online bank, would be considered "new and exciting" but I guess there is a real dissatisfaction with the current banking system. A bank that is easy to use and provides high interest rates on checking and savings accounts is very refreshing to consumers.
Prosper is successful because they match borrowers who want to pay less than bank or credit card interest rates on loans with lenders who want to earn more than bank savings account or CD interest rates on their investments. Through greater efficiency, will online banks such as ING reduce the spread between the two and shrink the market for Prosper?
Edit: Originally I did not see Prosper on the list and wrote this post as 50 best websites of 2007 - ING replaces Prosper. Thankfully an observant reader quickly corrected me. I've edited this post to reflect the accolade. Only the title and about three sentences were edited to make the post correct and I added the Time's review of Prosper. Congratulations Prosper!
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