P2P-Banking.com

Prosper Days 2008 took place Monday and Tuesday. Judging from the impressions of attending lenders, who blogged about it, it was a well organised event, but for seasoned lenders there were few news announced. No news about the long awaited secondary market. One blogger sees the Bidding via API function as highlight. Further news is that Prosper will start suing borrowers who defaulted on their loans. This could improve results in the collection process, where effiency is low. Explanations of Prosper about which changes were tested in the collection process were appreciated. 
A good improvement will be Prosper's plan to change payment dates. So far the date a payment is due has been dependent on the initiation date of the loan. Soon payment dates will be matched with borrowers pay day. I am sure this will reduce lates, but I do wonder why such an obvious and easy change was not implemented much earlier. Some of the international sites from inception took into consideration at which time of the month the borrowers are likely to be liquid when setting payment dates.

I hope Prosper will publish videos of the session on their website, like they did with the Prosper Days 2007. 

As P2P-Kredite.com reports the first 2 loans at German p2p lending service Smava.de have defaulted. Since the Start in March 2007 a loan volume of 1 million Euro (approx. 1.4 million US$) has been funded at Smava. The amounts of the two defaulted loans are 4,000 and 6,000 Euro resulting in a default rate of about 1%. At Smava loans default 40 days after they are late and are sold in a debt sale for a fixed rate of 25% (22% on lowest credit grades) to a collection agency.
2007 has been a very good year for Smava lenders as defaults (and late payments) have been significantly below expected rates.

In an email newsletter Zopa Italy encouraged its member to spread the word about Zopa to friends and relatives. Zopa says it is for 'a good reason': Zopa Italy pledges to lend $1 on Kiva for each new member that registers at Zopa Italy before January 15th.
Everybody can monitor how much Zopa invested on this lender page at Kiva.

I am sure that Kiva will highly appreciate this promotion, a target audience that is already interested in p2p lending gets introduced to Kiva's concept. But I am not sure if that is a good marketing campaign for Zopa. Should the lenders decide Kiva is an interesting concept they might lend their money at Kiva instead of at Zopa. Maybe Zopa speculates lenders will invest in both. Or Zopa wants the added social angle to increase chances of press coverage.

What do you think? Discuss this at the Zopa forum. 

(Source: Email newsletter from Zopa Italy, Dec. 27th)

Today for all new loans the interest rates at Lendingclub.com increase by 0.5 percent. At Lendingclub, unlike other p2p lending sites, the platform not the borrower sets the interest rate (based on credit grade). The increase was in reaction to rising borrower demand after Lendingclub eliminated state loan rate caps last week by going nationwide.

As a lender you can profit furthermore from two current promotions at Lendingclub. You get a 5% cash bonus if you lend 5,000 US$ or more by Feb. 3, 2008 (max. 20,000 per lender). Plus you get a 25 US$ signup bonus, if you sign up through this referral link.

Questions? Suggestions? Use the Lendingclub forum.

With several posts by CEO Chris Larsen Prosper.com starts blogging.

Welcome to the new Prosper Blog.

We’ll be using this blog to create a place to find up-to-the-minute news on the latest Prosper enhancements, enlightening and thoughtful Personal Finance opinions, touching Prosper Member Stories, and more. Your contributions are welcome. Please feel free to submit comments to any of the blog posts or send new articles and ideas to us at blog @ prosper.com (please remove spaces before using this email address) or submit a guest post.

We’ll be adding in posts regularly, so please stop back in again soon.

Warmly,

Prosper

The blog has been in preparation for some time. I believe we can look forward to some interesting articles by Prosper staff, borrowers, lenders and other guest writers.

MyC4 users can now easily give someone a MyC4 account as Christmas gift. With a 6 step process the user creates an account, transfers money and prints a christmas voucher.
The recipient is all set to start investing in loans.

Is this a clever viral marketing idea? Post your take on this in the wiseclerk forum!

I noticed prominently displayed Microplace ads on Technorati.com today. Not sure if it is really keyword-targeted or rather context targeted. When I did searches on Technorati on Globefunder or Kiva I was shown Microplace ads.

Technorati is an interesting choice for the campaign (if it runs only there - I did not check). Technorati is mainly used by bloggers and journalists. The ads would therefore target not the individual investor but the multiplier who might write about Microplace.
I noted that the ad display is NOT using geotargeting meaning it is not only shown to US residents but to viewer worldwide (only US residents can use Microplace at the moment).

(Sample screenshot after search for globefunder)

(Another sample ad, original is larger and flash animated)

After MyC4.com was featured on Danish national TV in a 15 minute feature many new lenders signed up. Within 3 days lender count rose from about 500 to currently 964. At MyC4 lenders (called investors) loan money to African entrepreneurs. The bidding frency of new lenders did lower closing interest rate dramatically. Loans now closed at 2 to 3 percent lender interest rate (previously usually 10 to 12 percent). MyC4 will now have to increase the number of listings, otherwise they might be temporably be sold out like happened to Kiva.
Yesterday the first loan listings from Ivory Coast went online.

On most peer to peer lending services (Prosper, Lendingclub, Smava, Boober) the identity of the borrower is hidden to the lender. Only the service itself knows the identity of the borrower. Therefore the lender has no means to check if information given is accurate and has to trust the platform.

The service has to

• ensure that it takes adequate measures to verify the identity the borrower has stated at registration is correct
• instill trust to the lender that the fraud risk of borrowers impersonating under a false identity is minimal, non-existant or while existant not covered by the lender.

Prosper gives a "100% Identity Theft Guarantee" and in case of identity theft repurchases the fraudulent loan:

Prosper reserves the right to buy back loans at any time. If Prosper buys back a loan, the outstanding principal balance will be returned to lenders and the loan will be marked as "repurchased".

Prosper typically repurchases loans in accordance with Prosper's 100% Identity Theft Guarantee, under which Prosper has agreed to repurchase loans from lenders if the loan is found to involve identity theft of the named borrower's identity.

Prosper is committed to providing a safe and secure marketplace, and works with law enforcement authorities to prosecute to the fullest extent perpetrators of identity theft.

Rateladder had one of his loans repurchased today. But how often does this occur?

Looking at the Wiseclerk Prosper loan stats by status, the column Repurchased shows a value of 400000 US$. Out of the total loan value of 96 million US$ that is about 0.4%. Not all of the repurchased loans are due to identity fraud.

Prosper checks identity by several measures like checking documentaion supplied by the borrower, calling him, verifying bank adresses, sending postcards to his adress… There have been several discussions on this topic with details on the Prosper forum.

Other services use other measures. German Smava.de uses the PostIdent-process a service that requires the registering service to produce a government id (passport) in person. The Postident process is used by nearly all German online banks and is considered quite safe.

P2p lending services can tolerate only a low level of identity theft cases. The innovative approach of p2p lending requires that lenders trust the concept and the service. Fraud cases endanger that trust.

Duck9.com is positioning itself as a peer to peer lending service for college students. Lenders can invest a maximum of $10000. In the video below Duck9 founder Larry Chiang explains the business model and the benefits for lenders and borrowers.

The video is from October 2006. It might be a bit outdated. While Chiang says in the video that lenders receive a free $100 to lend, the site currently states: "NOTE: there is a SIGNIFICANT waitlist to be a lender. Money isn't accepted while you're on the waitlist".