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Banking for the 99%...maybe

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(Photo by Eifachfilm Vacirca via Flickr Creative Commons)
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Back in the mid-2000's, peer to peer lending web sites like Prosper and Lending Club bet that ordinary people could take the place of banks. The business model was both daring and consistent with the hyper-connected internet culture. The idea was that people who needed loans could connect with investors willing to bet on getting paid back with a little interest. Prosper’s faith in crowd-sourcing replacing traditional risk-assessment tools used by banks turned out to be a mistake. Within two years, the SEC shut it down for not holding insurance to repay jilted lenders…it turns out that up to twenty percent of the borrowing crowd defaulted on their loans. Today’s tighter loan policies have paved the way for a new wave of P2P banks to again experiment with connecting people through lending. 

MacGregor Campbell is a freelance reporter and contributor to New Scientist magazine, where we found his article on the comeback of P2P banks. 

 

Virginia Prescott is the Gracie Award-winning host of Word of Mouth, Civics 101, The 10-Minute Writers Workshop podcasts, and the Writers on A New England Stage series on New Hampshire Public Radio. Prior to joining NHPR, she was editor, producer, and director for NPR programs On Point and Here & Now, and directed interactive media for New York Public Radio.

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