An interesting tweet from @giyom is at the origin of this post:
Will reintermediation happen in #P2PLending? i.e. investing in good performing lenders instead of borrowers.
If we look at what is happening in the investment management sector, perhaps we can extrapolate a possible evolution in P2P Lending.
The development of electronic trading and discount electronic brokers such as E*Trade, have granted a better access to the stock markets. People are now able to trade most products and markets, without having to use a broker, financial advisor, or other intermediary. But trading successfully requires good financial knowledge and time, which most people may not have.
Companies such as Kaching or Covestor, allow investors to follow the investment of “managers” (other investors for Covestor or qualified investment managers for Kaching). A reputation score (performance, followers) helps investors select their managers. A “management fee” is paid to the lead investor for its services. This fee should be less than for a regular mutual fund because most costs outside of management do not apply.
This reintermediation strategy could be applied to P2P lending. For some strategies, finding the right borrower, minimizing write down risks and maximizing return requires as much time and knowledge as investing in stock markets. Following the strategy of a successful lender for a fee could be an interesting offer.
Addendum: as mentioned by Tuomas Talola in the Comments: the basis of such a website exists at http://www.ericscc.com/ where you can review the performance and portfolio of each Prosper Lender. I would be interested to know how Prosper share that information and the rational behind it.
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