Peer to peer lending: Evolution and devolution

campaign banner with slogan 'of the people, by the people, for the people'

It’s tempting to think about Peer to Peer Lending (P2P Lending) purely in terms of progress, as an evolution towards a new way of lending and borrowing money; but, whilst there are plenty of reasons to think of P2P Lending as the future of savings and investments, it’s not all about looking forward…  Sometimes, it’s just as important to learn from the past.

Banking grew out of personal relationships.  Even relatively recently you could walk into a high street branch of your bank and talk to a bank manager who knew you and your situation… and who had the power to make a decision, there and then.

Yes, there were national and multi-national banking chains but despite their size, a personal connection remained between a bank manager and their clients.

Roll forward a few years and the internet has come along and changed everything.

Why the internet?

Well, because it was the web that ushered in a new era of competition in banking.  Overseas banks – like ING, Icesave or ICICIC – plus everyone from supermarkets to department stores rushed to woo customers with great online deals.

Savings rates rocketed, whilst mortgage rates fell and the introductory rates were good for everyone… until they weren’t.

Having decided to compete for rate grabbing online customers, the banks were under pressure to cut costs to avoid hurting their profits.

Again, the web stepped in to help.  Faced with the huge infrastructure of branch networks and an urgent need to save money, banks saw the internet as a way to scale back customer service and introduce customers to lower cost, remote ways of doing business.

That, too, worked really well.  Until it didn’t.

Suddenly, customers weren’t so much connected to a brand as making temporary use of a headline grabbing interest rate and instead of using the web to get closer to customers, banks had used it to create a gulf.  The clients, whose relationships they valued no longer had a way to chat or engage with them, even picking up the phone often meant speaking to an offshore call centre.

Peer to peer lending is online too – but instead of a service that’s remote and aloof, we want to use the social web to create a community of lenders and borrowers.  We love the efficient, 24/7 feel of doing business online but we know we need to listen to and engage with our community, too.

We think P2P Lending can help rewind the clock to a time when local communities helped themselves.  P2P Lending can be large scale if you want to invest nationally, or it can become hyper-local for lenders who want to invest in businesses within their own communities.

As the concept spreads, the amount of loan opportunities will grow and there will be more and more choice about where – and who – to invest in.

That power to control your investment is our way of giving power back to customers.  Whilst P2P Lending offers a great return on your money in comparison to high street deposit accounts, we are being careful to create long-term, sustainable lending communities that create deals that offer better value for everyone.  We’ve used to the web upfront to save on infrastructure costs so our great rates really are great, and they don’t force us to compromise on service as a result.

As a FundingKnight Lender you benefit from making your money work harder and get more say in the business investments that are right for you.  Meanhile, borrowers are assessed as real people, rather than treated as data to be plug into a computerised scorecard.  We like to think it’s combining the best of both worlds – the efficiency of the social web with traditional relationships banking.

So, yes, P2P Lending is progress, but it’s about devolving power back to you, the customer, as well.

We’ll use the web to get closer to our customers and we’ll use social networking to listen to what you want.  It’s early days here at FundingKnight but we hope you’ll head over to our website and sign up to stay in touch and please do let us know what you think; we’d love to hear what you’ve got to say.

Or, if you are a well established British business looking for a fast, flexible and competitive loan, apply for business funding today, we’ve got funds ready to lend.

Photo used under Creative Commons License

One thought on “Peer to peer lending: Evolution and devolution

  1. Pingback: Reconnecting with customers | FundingKnight: The Blog

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