digital dough

Fintech Lends a Hand

Lending Club AP
The success of Lending Club, the U.S. peer-to-peer lending market leader, saw it go public in December 2014.
  • Why it matters

    Why it matters

    Higher-risk borrowers can more easily secure funds from peer-to-peer lenders, while traditional banks are losing profits to the start-ups.

  • Facts


    • Peer-to-peer borrowing rates are often lower than traditional bank loans, and returns higher.
    • U.S. market leader Lending Club issued $1.6 billion (€1.46 billion) in loans in the second quarter of 2015.
    • In the next five years, it’s estimated that such lenders will snatch $11 billion of a total of $150 billion in profits from U.S. banks.
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User #55981091 wants a vacation. $10,000 should be enough to cover a couple of weeks of beach time. The problem is he doesn’t have the money.

Fortunately, there are plenty of people willing to lend it to him. Thanks to the online platform Lending Club, he already has 82 percent of the cash – from 187 different lenders.

He doesn’t know any of them and because of his high-risk credit rating, he’ll have to pay them about 20 percent interest. But that’s better than it would have been from a bank, where the vacationer probably would get no loan at all.

Welcome to the world of peer-to-peer-lending. What began as a more democratic alternative to conventional banks a few years ago now attracts millions of users, both borrowers and investors.

For individuals, it is a faster and cheaper way to borrow money. Likewise, anyone who has money lying around can be a lender and pocket yields of 5 to 8 percent on average.

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