Peer to peer lending startup, Prosper
,
is expanding operations to Japan and other Asian countries as a shared
partnership with Tokyo-based SBI Holdings, Inc. SBI will be helping
prosper navigate Asia’s regulatory environment. SBI Group has a market
capitalization in excess of $8 billion and consists of 65 consolidated
subsidiaries and 12 affiliated companies, including 9 public companies.
Prosper handles loans of up to $25,000 (the average funded loan is
$5,000), broken into smaller loans to distribute risk. Money for the
loan is then supplied by Prosper lenders bidding for the most
attractive interest rates. Prosper earns revenue by taking 1% of the
loan amount in fees from the borrower up front, and charging a 0.5%
yearly loan maintenance fee to lenders. Prosper currently has over $79
million in funded loans and more than 380,000 members. So far it
appears a lot of those members are logging on to pay off credit card
debt at a lower rate. Prosper’s backer, Benchmark, has also invested in
another P2P lender, Zopa.
It’s ironic to see these peer to peer lending startups expanding at the same moment the collapse of the sub prime lending market sends waves through the mortgage market. Similarly, these startups will be sink or swim based on their ability to effectively manage risk.
Prosper is managing risk by encouraging transparency, automatically
deducting monthly loan payments, and tracking reputations. Borrowing
groups are another risk management tool, both helping first time
borrowers get some initial credibility (and lower rates) while
encouraging the network to police itself by tying together their
reputations.
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