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A growing number of online startups are beginning to use technology to offer services previously limited to banking institutions.  Now these startups are offering the same or similar services at lower prices because of lower overhead and staffing costs.  One of the largest of these new companies is Prosper, a peer to peer lending exchange that matches people looking to borrow money with people interested in lending money and earning a return on their investment.

People are leaving larger banking institutions and using the services of these companies for a variety of reasons.  Some are angry about the bailout of the largest banking institutions and refuse to do business with them any longer.  Some feel shut out of the traditional banking process due to low credit scores or past credit problems.  There are even some that feel that dealing with the larger banks is too much of a hassle and are looking for simpler alternatives.  Whatever the reasons presented, the number of people using these online services continue to grow each year.

These online startups are part of a growing wave of “crowdfunding” startups, created to offer alternatives to those who no longer want to deal with banks or venture capital firms. The best ones offer excellent customer service, even though they lack physical branches, and allow customers to access their services 24 hours a day.  Peer to peer lending companies offer small loans at attractive interest rates and online companies resembling banks offer checking accounts and debit cards. 

The peer to peer loans that Prosper provides are securities for investors, according to the Securities and Exchange Commission, and are treated as such under the law.  Lenders are provided information about the risks of investing their money and risk assessments for each person interested in obtaining a loan.  Every person interested in becoming a lender should thoroughly evaluate the background and reputation of the company and professionals they are interested in doing business with prior to signing any contracts or giving the company access to personal financial information.

Technology is opening new doors in the banking and financial industries and providing more options for consumers.  Millions of people have been using these new companies and millions more have started researching to see how these companies may benefit them.  Some of these people may choose never to use traditional banking again.

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