Now that P2P lending has gained a little bit of ground (the press has, for the most part, stopped referring to the space as "nascent" – though it's certainly still "toddling"), I thought it would be fun to revisit the early days when things were just getting started – when everyone and his brother had a great new revolutionary spin that the P2P lending platforms just had to work in somehow.
The early adopter community that grew up around the first P2P lending companies gathered together primarily in forums and message boards, where a collegial atmosphere of openness and transparency reigned. All was right with the world, and the world was going to be changing.
There were lots of interesting ideas born, strategies argued, plots hatched – which, I guess, is what happens when such a disparate group of people come together to discuss anything, through the twin lenses of community and technology – but this time it was all about finance.
We also used to hear several times a week from someone who thought it would be a great idea if the peer-to-peer lending model could be adapted to some slightly different purpose, and, from those conversations, a wealth of ideas sprang up. Here are some of the more popular:
P2P Venture Capital
This was by far the most common suggestion. Everyone wants a piece of a revolutionary startup, and the earlier you get a piece of it, the more it's worth. (Well, usually!) The general idea: Throw $50 each at 100 guys working out of their basements, hoping one of them goes on to be the next Google. Someone tried this during the late 90's boom (and went boom), but it's, legally, very complicated to implement due to SEC regulations and compliance issues. But it'd be fun! Especially if you could also trade those super-speculative startup shares. ("I'll give you 100 shares of LoLz0Rz.com for 500 shares of RoboKitty 2.0, deal?")
P2P Mortgages
Imagine combining a P2P lending platform with Zillow (the online real estate search portal), except that not only could you browse for a new house, you also could get a mortgage from hundreds (or thousands) of other users. This is one that I think will happen eventually (in fact, since I wrote this blog post about a week ago, Zillow has announced it's going to start integrating traditional mortgage offerings into its site. While not "P2P" quite yet, it may get there – spurred on by the housing meltdown and the recent problems with mortgage backed securities.) You can bet that no one will "forget" who owns a $500,000 mortgage if it's owned by 20,000 vocal lenders at $25/each.
P2P Auto Loans
Though the loan won't actually be tied to the vehicle, this can already be done through P2P lending for vehicles that cost less than $25,000 (or you can always finance, or refinance, the first $25k through peer-to-peer lending, for cars that cost more than that). Just take out a normal P2P loan and use the proceeds to fund your car, truck, bike or boat purchase. (If boat, happy mid-life crisis!)
P2P Micro/Mobile
You're in line at the movie theater and your dozy friend forgot his wallet again (the same way he always has to go to the bathroom at dinner when the check's about to come). What do you do? Buy his ticket and his $10 Coke, but not before he clicks "OK" on your cell phone and officially promises to repay you, plus interest, for your pretzel-buying trouble. There are a number of companies who have finally begun to pursue the Friend-to-Friend Micro-Lending market in the US in the last year, including: BillMonk, Buxfer, and OboPay.
P2P Media
This is the same idea as P2P Venture Capital, except to be used for funding artistic endeavors like films, movies, musical acts, etc.
Social lending platforms have yet to see many loans from small filmmakers or musical acts – and you'd probably want to be buying an ownership stake in these types of ventures, rather than just lending them cash – but, on the fun side, you might inevitably attract the 600,000 local bands on MySpace who each think they're going to be the next ones to "make it" (you know, the same ones who are downloading an MP3 or two from artists they like, while working on their "band page"). But, hey, Mr. Local Bar Jam Band, maybe your loyal fan-base would come together to make you an auto loan via a P2P lending platform, so that you could go play a show in their town – since mom won't let you take the station wagon to "gigs" (especially after what happened to it last time). I hear old VW Buses go for way under $25k. Zoom zoom!
P2P Insurance
A large group of people get together, pool their insurance premiums, and mutually agree to insure one another. This already occurs – though usually with loads of middlemen and many layers of re-insurance involved – in some mutualized insurance schemes. It would make for great collective bargaining after a certain point, assuming that no one, say, got sick or had their house burn down or car stolen until that efficiency point was reached. The government is the best positioned to pull this one off, but they're supposed to already.
P2P International
P2P lending and borrowing in international currencies. Think P2P Foreign Exchange, or "Earn in yen, lend in dollars." There are all kinds of very interesting hedging/trading possibilities here, the general idea being that one could take advantage of fluctuations in the international markets. If a housewife in Japan could make 8% more lending her yen out in dollars to Americans (who need to, say, prop up their flagging currency?) – well, why shouldn't she be able to? And vice versa. This will be here very soon, as governments and large financial institutions already engage in this activity, the opportunity will no doubt become available in a P2P environment.
I'm a huge fan of disintermediation and love these kinds of ideas. This is just a small sampling; there are so many others out there. If you've got a good one, a bad one, or just a funny one, feel free to leave comments. Who knows? It might even turn into a reality.
2 Comments