Think Flat

I am not sure whether some of the regular visitors to this site recall my posts on innovations in consumer lending, back in March of this year. I had discussed the emerging model of peer-to-peer lending, pioneered by firms like Prosper.com.

In the final post of the series above, I had painted a potential scenario wherein peer-to-peer lending sites find a way to securitize and sell the loans transacted; I was happy to read a recent report in the American Banker (read here – subscription may be required) which mentioned that Prosper has filed a registration with the Securities and Exchange Commission in the US to develop a system  enabling people to resell the loans originated through its website.

While I am personally happy that a trend I had predicted has been vindicated by actions in the market, this piece of news is probably very timely, given the credit-market crisis that is unraveling around us. It reinforces the fact that the Internet is constantly driving more innovative and efficient ways for markets to exploit newer transaction opportunities. It also signals the fact that Internet based business models can build resilience in traditional markets.

Prosper’s strategic move may have a limited impact in the short term, given that it currently caters to niche, high cost, individual loans; however, larger financial institutions focused on retail lending need to watch developments in this area very carefully!