InnovationsinP2Plendingmayputcomputersoverpeople.PDFVIP

1 3 t o h s p a n S g n i Innovations in P2P lending may put computers over people k n a B Welcome to the machine - E November 2009 e g P2P lending is an alternative way of originating loans (mostly) without n banks. Peer-to-peer (P2P) lending sites broker small loans between savers and a h lenders online. The loans are usually unsecured so that lenders bear the full credit c risk. Since 2005, many P2P lending sites have popped up around the globe (see l E-Banking Snapshot 22 for more background). There are substantial differences a r between the sites: Kiva, for instance, channels loans towards entrepreneurs in u t developing countries, whereas other sites target lenders and borrowers in mature c u markets. chart 1 r t The largest sites in the US have originated loans worth more than s d USD 200 m in total. This is, however, only a tiny fraction of the overall volume n of outstanding consumer loans in the US –which stands at USD 2.4 trillion. a chart 2 y m High interest rates and media coverage attract lenders. Many German o lenders, for instance, flock to P2P lending because the promised interest rates n o exceed that of, say, bank deposits. The flipside is of course, that loans are not