Current Issues Project On Peer Lending

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Current Issues Project: Peer-to-peer Lending Advancements in technology coupled with new legislation have brought upon a game changer in the financial industry known as peer-to-peer to lending. Originally established as a way to help boost the economy in developing countries, peer-to-peer lending is expanding its capabilities into first world countries through online platforms. This new industry is experiencing tremendous growth, with pwc estimating that it could be a $150 billion business by 2025 (Karabell). The Lending Club and Prosper are two of the biggest online platforms that currently offer peer-to-peer loans. Inspired by the 2008 financial crisis, both the Lending Club and Prosper saw the Todd Dockley Act of 2010 as an…show more content…
Another example of a successful peer-to-peer program is Airbnb, which allows homeowners and apartment renters to rent out their homes to travelers who are looking for a more affordable place to stay. As a result the taxicab companies and the hotel chains are now facing new competition due to technology advancements. All of the aforementioned companies have one blaring thing in common- they remove a middleman. Whether that be taxicabs, financial intermediaries, hotel corporations, or the music industry, these peer-to-peer programs have proven to be successful, are expected to grow, and industries now have to adapt to new competition. Peer-to-peer lending removes the traditional bank intermediary and directly connects users looking to borrow money with users looking to lend money- all from their computer or phone.
The Lending Club functions without being classified as a financial intermediary in a variety of ways. One way the Lending Club avoids classification as a financial intermediary is by not having any type of banking license. This allows the Lending Club to operate as a tech company (Buhayar). Instead of purchasing banking licenses, the Lending Club processes loans through an online banking service known as WebBank. While relatively small with only 38 employees, WebBank is one of the most profitable banks in North America. In fact, its employees
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