Browsing through the Internet demanded originally some previous knowledge when you wanted to find something. Sites were scarce and they were too oriented towards information depots – you knew that there was a clear distinction between real life and the virtual web, as contents you’d find in one were different and required specific search logic to find it. I’m talking about the time of the Web 1.0, of course, where you could find some static non-interactive information regarding your traveling needs, for example.
The evolution in the Web was so amazing that searching for information on any given search engine is a natural input of keywords – users no longer have to devise careful anagrams and keyword combinations to find the page they needed. Essentially, they have to think what they need, type it in and find it. This shows how the fusion of the virtual and real world has evolved – you know you’ll find those tickets you need, the hotel you want to book and information regarding what other users thought about the services you are using.
This leaves a lot of room open for the transition of offline services to the online world – that’s what people are expecting to find – but, of course, taking in account the whole sociological and societal evolution that is occurring online. In this logic, a great amount of services online are appearing in a daily basis, taking advantage of the tools and spirit the users are immersed.
This entire introduction serves as a basis to explain a type of website that is a perfect example of real world meets virtual world in web 2.0 logic – Social Lending Sites or Microlenders. I’m not talking about lending services for objects or services – I’ll approach those on another post. The Peer-to-peer lending focuses on two axis – people who have money to lend and people who want to borrow money. Each user is a bank on its own and can gain interest off a loan while users who want “small” amounts and that wouldn’t be eligible for a loan in a real bank have an opportunity to get that investment cash!
There aren’t many P2P Lending Websites existing yet – mainly we have four big sites:
- Zopa – Having already gathered three web awards since 2006, Zopa works by giving credit scores to borrowers for lenders information. The Lenders make offers with a certain amount and time period oriented towards on credit score (A+ to C). The Borrowers can then choose from the various offers they have towards their credit score. Since no bank is involved, Zopa does all the mediating – paperwork, checking legal the identity of the users and cases of missed payments. Another concept introduced by Zopa was the split lending – one user who needed 1000 € can get it from 50 different users until that amount is gathered. Of course, Zopa receives money through transition fees from both parties.
- Kiva – Kiva is the “benefactor” of the P2P Lending Sites, as it focuses on loans to low-income entrepreneurs in developing countries. The Lenders can find what country, region, business and risks associated to their loan via the website and present a loan to the struggling business-man. Borrowers don’t apply for loans – they post their needs and the Lenders browse them, searching in their hearts for the best business opportunity while helping someone. Like Zopa, users can join together to raise the money needed – but while in Zopa it’s a Borrowers initiative, in Kiva it’s the Lender’s who contribute with what they can to each business. Field wise, each country has its own MFI (Micro Finance Institutions) who track the loans, their use and payments. Since it is a non-profit website, PayPal allowed Kiva to transfer the money without transaction fees – partially due to the fact that Kiva’s Presidente, Premal Shah, was Principal Product Manager at PayPal. This website has gained high visibility at Oprah’s, after which a lot of the struggling businesses found a happy ending to their financial needs;
- The Lending Club – What differentiates this site is the lender-user match up service it consists upon and the use of the Facebook application platform to connect lenders and borrowers. It’s a use of the Social Graph and connection trust as security for the users. The Lending Club has high credit standards – they turn away borrowers who are too risky and do a rigorous checking before any transition, claiming to be the safest P2P Lending Site available. They focus on one-time event loans and credit card debt consolidation loans;
- Prosper – Not wanting to repeat myself, Prosper uses the same principle as the other contenders, differentiating in one main characteristic – borrower group affiliations. This group functionality allows borrowers to group together and gain reputation according to their collective repayment records. The better the reputation, the lower the rates the users will get of future loans. Using a auction platform, lenders set their interest rate and bid in increments on the loan listings they’re interested in. After an auction is over, Prosper gathers the bids with the lowest rates and combines them together into a single loan – handling all the administrative tasks from here on.
To what point has the Internet evolved that allows for users to directly lend money to each other, having only a small company (when compared to a Bank) managing these transactions? This shows that some of the “new media fear” surrounding the Internet and financial transactions associated to it is beginning its decline. Of course, I didn’t approach the natural dangers and gaps that can rise in these sites - but they’re just taking our first steps in this area, so some things need to be fine tuned. Besides, the online social network structure and work ethics have shown us that there is definitely space for growth in services that depend on user-user interaction and trust.
Besides being an important learning for most marketers, these websites show us two things:
- The power behind the social networking in any aspect of the online life – trust is rising on the web. People trust peers and causes – Kiva hopes for a better future and The Lending Club helps people who already know each other to share money – these sites aren’t loan sharks but intermediaries of a natural loan flow that should happen in the online world;
- The fusion of real life and virtual web – when thinking on your next campaign, try not to think only about the online – that’s old and it doesn’t work anymore. The online and offline worlds are becoming one, like steps in the same staircase. Don’t consider the online experience always as an alternative experience to the offline – sometimes it’s just better to think “What are people doing offline that the online would simplify and help?” – you might just find that winning edge for your Brand.
It should also be noted that with Kiva, lenders do not receive interest. This is, for lack of a better term, charitable lending.