The popularity of bitcoin has demonstrated that there is room, or at least a desire, for alternative methods of payment. The tumultuous nature and scattershot acceptance of the digital currency makes it unfeasible for most scenarios, however. It’s no surprise, then, that other types of alternative payment options have sprung up lately, such as peer-to-peer (P2P) lending.
Nowhere near as radical as a digital currency, P2P lending allows people and companies to bypass banks by connecting borrowers and lenders directly via online platforms. Mostly used for small loans, P2P lending often leverages proprietary technology to assess risk, interest rates and how worthy of credit a borrower may be. It’s a more flexible option that seems to be a natural reaction to the various costs and requirements that go along with lending and borrowing via banks.
The way P2P lending works is relatively simple. Borrowers list loan requests between $2,000 and $35,000 on a lending platform, at which point retail and institutional lenders can invest as little as $25 in each loan, or the full asking amount. The P2P lending platform then takes care of keeping track of the loans, collecting repayments and pursuing defaulters. For this, platforms will charge investors annual fees of one percent of their loan amounts.
As it stands, there are two major players in P2P lending, LendingClub and Prosper, both of which are based in San Francisco and both of which are seeing tremendous growth. Of course, each has its own platform.
Curiously, P2P lending mirrors WebRTC in many aspects. Both put the focus on peer-to-peer rather than relying on more traditional methods and institutions and both are in their relative infancy. As it so happens, the WebRTC data channel could even be used to facilitate P2P lending, though there’s no real reason for this currently. Who knows, though? There could be room for a WebRTC-based P2P lending platform that adds a little personal touch to the process by allowing for face-to-face contact.
Edited by
Cassandra Tucker
