P2P Lending Emerges

Peer-to-peer technology allows for a whole bunch of things, most notably the sharing – stealing? – of music and videos. But P2P technology is also being used for other interersting applications. A friend of mine, for example, has been working way on a service called BetBug that enables people to make bets with each other rather than using a bookie. Another P2P market starting to emerge is personal lending. The idea is rather than seek a loan from a bank, you borrow it from someone looking to make “an investment” with excess capital they want to deploy.

In the U.K., which seems to embrace P2P technology with more enthusiasm than other places, Zopa.com has attrated more than 140,000 users, while in the U.S, Prosper.com has 240,000 users and already facilitated $50-million in loans. For Canadians looking to get into P2P lending and/or borrowing, CommunityLend hopes to fill the gap later this year. Started by Colin Henderson, who used to head up Internet banking at the Bank of Montreal, and Michael Garrity, who used to be v.p. of marketing and sales with ePost, CommunityLend is working on getting the necessary regulatory approvals, as well as some venture capital. Here’s CommunityLend’s pitch:

“CommunityLend is exactly what it sounds like. It’s an online community where people lend money directly to other people. It is an exciting and unique lending exchange for Canadians that will revolutionize the way lending works in Canada. We are not a bank, in fact, we’re better. We are a lending community made up of your community. You can set your own rates, payback periods and meet some cool people along the way, all without paying irritating banking or investing service fees.”

It sounds like an interesting concept, although I’m not sure how enthusiastic Canadians will be about embracing a P2P financial service that could have a fair bit of risk involved. After all, we’re a country of savers who think mutual funds are the greatest investment tools since sliced bread, and look forward to buying Canada Savings Bonds despite the fact the interest rates on them are next to nothing.

For more on CommunityLend, check out this story in yesterday’s Financial Post, as well blog posts by Net Banker and William Azaroff.