- Social Lending Q1 Update: Prosper and Lending Club Combine For Over $30 Million in Loans
- Zopa Gets U.S. Launch Ready - "Funds Will be Federally Insured"
- Social Finance Deadbeats: Worse Than a Photo on the Wall
- LendingClub Founder and CEO, Renaud Laplanche - Interview
- More On Lending Club - "No Longer a P2P Lender"
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Is Citibank Concerned With P2P Lending?
Written by Allen Stern - August 22, 2007
Are the big P2P lending companies (Zopa, Prosper and to some extent Lending Club) starting to make Citibank a bit nervous? While the immediate answer is no, I have to believe that eventually it might account for a small percentage of loans that the big banks would have normally been able to sell. Over time, this small percentage could account for billions of dollars worldwide. I wrote a 3-part series about social lending earlier this year which is a great primer if you are new to this market.
Typically personal loans have some of the highest interest rates which is the category that P2P lending falls into. Yesterday I noticed the advertisement below for a personal loan at Citibank. The terms are very simple and the interest rate is 10.05% which is extremely low. This low interest rate plus no collateral or down payment make me really wonder if they want to lock up as many personal loans as possible before Prosper/Zopa hit the U.S.
Here is the ad on citi.com:
COMMENTS - Add New Comment
I wrote about social lending services a couple of months ago, and when it comes to small personal loans, I think banks will be facing serious competition as the number of lenders on these services grow. Propser, which is already in the U.S., is doing quite well for its users. And Zopa is apparently doing well enough in the U.K., and sees enough room for growth in the U.S., to make it worth their while to expand to the U.S.
Social lending services are better for personal loan borrowers than banks, because they give borrowers with a more poor or shorter credit history a much better chance, and borrowers with an excellent credit history a much better choice of interest rates. And they're better for lenders because obviously, they're giving them a way to lend and make money from doing so.
The best chance for either banks or lending services to gain a more competitive edge is to increase the number of value-added services they offer. Each have different strengths they can play to, and they should think about what makes them different from the other, and how to use that to offer advantages.
If you're interested in seeing my overview of social lending services, it's called: Small Loans, Big Bucks: The World of Social Lending.