On March 11, 2012, I posted about peer-to-peer financing. I wrote at the time that I felt this was a way for the people to use the system against itself. It is not a perfect answer, but it was one tool that can be used. I still believe this to be the case. However, I heard something that is only slightly disturbing this week. It is also reaffirming.
Google is getting involved. Google directly, mind you. Not their investing arm, Google Ventures. Google is investing $125 million dollars and taking a seat on the board at Lending Club. This indicates a number of things.
From a practical standpoint, neither Google nor Lending Club are speaking out directly about what their plans are specifically. Speculation is that Google wants to implement their technology and bring Lending Club into the Google Wallet fold. There is also, of course, their cut. It’s just a good investment, when they’re going to get a slice of the loan fees generated; $350 million in loans in the last quarter.
It also, indicates that people are catching on more and more to this method of lending. People are looking beyond banks more every day, and seeing other methods and ways to move beyond them. Consider:
Chanda Lugere works for a bank, but when she wanted a loan to consolidate her credit card debt, which carried a high interest rate, the bank didn’t have much to offer. She tried other banks, but even with her excellent credit score she got nowhere.
People living in a 20th and 21st century capitalist society often find themselves in need of credit. That is, sadly, a reality. It was not always so, and it does not always have to be so, but it is the case now. Do we have to go through the wringer to get it? Do we have to sell our soul to the company store? Not necessarily. Peer-to-peer lending offers a way forward for people to get financing to reduce the interest they’re paying, while still returning a profit to those lending. As I wrote in my previous piece on this topic, this not only has a solid financial basis, but a much higher social value. For the borrower though, this saves them significantly and thus allows them to get out of debt much more quickly! Chanda Lugere, mentioned above, got her loan at 6% which, while still high, is half of what she was paying.
Another issue that Google’s investment indicates though is that bigger businesses are catching on, and this part worries me. If big business gets into the game, they will find ways to pervert it. They will find ways to wrest control of the system even further away from the people. Make no mistake about it, business was already involved. As I pointed out in my previous piece, both of the big P2P lending facilitators, Lending Club and Prosper, were associated with WebBank. This, as Robin Chase, founder of Zipcar put it, is not a true peer-to-peer system, but rather a “peer incorporated” system. The smaller the corporation stays in relation to the overall system though, the more the peers are able to stay in control and to benefit from the system, rather than to become simply grease for the gears.
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