The days of dressing up in a suit, heading down to the bank and securing a personal loan and a trusted firm handshake are as outdated as girdles and ascots.
Companies such as LendingClub, Kabbage and Prosper have created a model where individuals can earn interest by lending money to other individuals. It almost sounds like the old credit union story:
“We started by keeping deposits in an old coffee can that was locked up in Agnes’ desk drawer. Folks would come down on payday, to make deposits and ask for loans. We have the original ledger framed in the Board room.”
Someone needs a loan. Someone has money to invest. One peer lends to the other with the lending peer earning interest. The Fin Tech company then earns a fee for brokering the deal.
The biggest difference, now, is that peer-to-peer lending is much faster. You can invest in or apply for a loan on your smartphone 24-hours a day. And what demographic would you think this is attracting?
Fin Tech has been gobbling up market share since 2010.