INNOVATION is a dirty word in finance these days but, with securitisation markets gummed up, fresh thinking may be just what credit markets need. Prosper and DebtX, two online marketplaces with very different customers, are among those who think they stand to gain.
Prosper’s principal business is as an online peer-to-peer lender, matching up individual borrowers and lenders. Since October, Prosper has been dormant as it goes through registration with America’s Securities and Exchange Commission. But on April 28th, thanks to special dispensation from the Californian authorities, the website started up again.
With credit scarce and savers battered by low interest rates, the ground is already fertile for standard peer-to-peer lending. But Prosper has now started to let institutional lenders use its platform to auction off consumer, car and small-business loans to Californian residents. Before they can sell them, lenders must have held the loans for at least three months, in order to establish a payment history. Prosper members can see the borrower’s credit history and view any collateral. They can then bid to buy a slice of the loan based on the yield they are willing to accept. Read more...
