Prosper.com, also known as the Prosper Marketplace, was the first company in the United States to launch a significant online peer-to-peer lending service that connects borrowers and lenders. Since the company was launched in 2006, a number of competitors have propped up.
Prosper.com’s primary competitor in the United States is Lending Club. Lending Club started as a Facebook application in 2007, but has since moved to its own website. Lending Club operates using a similar business model to Prosper, but has slightly stricter requirements for borrower. Borrowers on Lending Club are also charged a fixed interest rate based on their credit score rather than having their interest rate determined by a reserve Dutch auction between potential investors.
Another organization that has a significant footprint into the world of online finance is Kiva. When Kiva, Lending Club and Prosper Marketplace first came into existence, Kiva was grouped with peer-to-peer lending companies, but it’s really a different animal. Kiva is a non-profit microfinance organization that connects small business owners in third world countries to investors overseas. Loaning money to small business owners on Kiva is much more of a charitable gift than it is an investment because you do not receive any interest on the money that you put in.
Virgin Money also had some US operations but have recently exited. Virgin Money didn’t connect borrowers and lenders like Lending Club and Prosper do, but instead formalized loans between individuals and collected payments. You would have used this service if you wanted to loan money to a friend or family member. However, Virgin Money appears to have ended all of their US operations sometime during the fall.
Fynanz is another peer-to-peer lending website in the United States. Unlike Lending Club and Prosper, Fynanz operates strictly in peer-to-peer student loans. Fynanz offers peer-to-peer loans to students using a partner site, custudentloan.org.
Raise Capital.com is another new entrant into the peer-to-peer lending industry. Raise Capital has placed itself in a niche of the peer-to-peer lending industry by connecting small business owner with potential investors. The funding that investors provide to business owners is similar to angel investing, but entirely online.
The peer-to-peer lending industry has diversified itself into various niches and will likely continue to do so. Currently Lending Club and Prosper are the behemoths in the industry and other niche players are looking to find their place in the world of online lending.
