The Bankwatch

Tracking the consumer evolution of financial services

NetFinance2007 – meeting notes – Prosper

There will be a couple of posts, at least here.  First few will be meeting notes based on what I took from a few of the excellent speakers.  Then I will do one with some analysis.

My Take:  Very clear description of the Prosper model.  Prosper brings a combination of the advantages of traditional community markets with capital markets.  Investments as a security class are coming.

Open access to consumer credit in a real world fashion, with inherent loyalty that traditional markets (Banks) can never achieve because of the shame (engagement?) factors.

Chris Larsen – Prosper:

  • Web 1.0 – Command and Control
  • Web 2.0 – company steps back – lets people run it
  • the test:  what if there were no people?  Walmart.com would continue – prosper could not operate
  • Marketplace for many
  • open access to consumer credit
  • leverage power of the community
  • similar to eBay – Capitalism for the masses
  • available to anyone’s interpretation of “bottom line”
  • Borrower can remain anonymous – most do not
  • endorsements:  Linkedin for money – represents information that Banks do not have
  • Endorsees would be notified of loan defaults
  • Prosper believes in the “shame factor” for defaulters
  • Capital markets: no borrower loyalty, no shame factor
  • traditional community markets: “Its a Wonderful Life” (Jimmy Stewart) ‘your money is in Fred’s house’ – no diversification and no liquidity
  • Prosper market – combines both sets of benefits liquidity, diversification with community benefits
  • Groups and group leaders fashioned after eBay power sellers
  • 1/2% loan amount
  • payment reward % of each borrowers payment
  • Groups should work like affiliate card groups
  • Prosper Days modelled after eBay Live Events
  • Collections – as eBay – go the extra mile against criminals to make Prosper the strongest link and de-motivate criminal elements
  • Prosper:
    • Fraud
    • Borrower evaluation
    • Loan servicing
    • Standards and marketplace
  • Community
    • credit and pricing
    • groups
    • reputation
    • unacceptable behaviour
  • Statistics
    • Regd users 260K
    • Loans $54million
    • Borrower loans 10K
    • Promissory Notes 550K
    • payments to lenders 1.4 million
    • discussion posts 280K
  • Secondary market of tradable assets coming
  • overall – replacement for the credit card and personal loan market
  • Alternative to existing markets “not a lender of last resort”
  • enablers which allowed Prosper to occur:
    • open access to credit scores
    • online payments ACH, thanks largely to Paypal
    • Acceptance of social networking
    • commercialisation of micro lending
  • Comp intel – Prosper use Wells Fargo, as do Paypal
  • Summary:
    • Prosper reflects the operation of the real world between people
    • Traditional command and control is paternalistic

     

    Written by Colin Henderson

    April 20, 2007 at 11:18

    Posted in Social Lending

    2 Responses

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    1. Another great presentation at Net.Finance.

      Chris Larsen was as always very clear and inspiring. He toned down past rethoric against banks but it was natural considering the audience (do a search for one of his Stanford presentation to have a feel for the flip side).

      Other than the business model and operational parts it will be interesting to see how Prosper will manage letting banks compete for loans in their marketplace (a possibility Chris mentionned).

      One particular aspect to watch will be how their community will react to banks coming in (if banks take too much place in the marketplace the community may well see it negativly and react the same way).

      Very intetesting company along with Wesabe.com

      Martin

      April 22, 2007 at 17:06

    2. […] have been posted on the Prosper.com discussion forum, according to CEO Chris Larsen (see here for Colin Henderson’s complete notes on this […]


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