Crowdlending: A better name for peer to peer lending?

crowd gathering in Union Square

Last week, I came across this article written by Peter Renton and published on the Social Lending Network, his guide to peer to peer lending.

He makes a really good point about the lack of consensus on what peer to peer lending should be called.  His post is focused on the US market, which  is dominated by Prosper and Lending Club, but here in the UK, too, it can be hard to capture succinctly exactly what it is we’re all about.

If you take a look at the homepages of Funding Circle or Zopa the term peer to peer lending is conspicuous by its absence. Our own FundingKnight website introduces more explicitly the concept of peer to business lending… but is that enough?  Is it a term that makes sense to people, that you understand and which tells people – clearly – what it is we do?

We think there’s room for improvement.

Peer to peer lenders talk frequently about marketplaces and that’s great at capturing the idea of a transaction between lender and borrower, of the auction process that secures a competitive rate on a borrower’s business loan and lets lenders choose which loans to participate in…. but it’s less good at conveying the idea that one loan is made up of lots of smaller lenders pooling their money together.

As our borrowing community grows here at FundingKnight we’ll actively encourage lenders to spread their investment over a wide selection of loans to reduce the risk if any one loan doesn’t get repaid.  £25 is all it takes to get involved in a loan and your £25 will go into a pool along with contributions from other FundingKnight lenders, all of whom want to lend to a specific business borrower.

This idea of lending groups – 0r crowds – is why we particularly like one of Peter Renton’s suggestions for re-naming the industry.

We think crowdlending is a great way to explain the concept of crowds lending to one borrower.  It maintains space between peer to peer lending and crowdfunding – which is, after all, quite another beast, but brings the idea of group action to the forefront.

So, what do you think?  Do you like crowdlending or do you have another, even better, suggestion?

Photo made free to use by the Kheel Center, Cornell University

10 thoughts on “Crowdlending: A better name for peer to peer lending?

  1. Personally I prefer the use of “peer-to-peer lending” as it describes quite simply the process. The other term “social lending” perhaps portrays lending to individuals who would find it harder to obtain funds from elsewhere, however quite the opposite is true for most P2P lending. “Crowdlending” is a new term along the lines of “crowdfunding”, but it doesn’t really describe the process.

    • [Disclaimer: I work for Funding Knight, but these are my personal views.]

      Ian,

      I completely agree with you about Social Lending. When I hear that I think of Kiva, or Grameen – lending as a way to achieve specific development objectives.

      I don’t think that ‘Peer-to-peer’ is quite right for Funding Knight. The borrowers are UK companies and the lenders are individuals – so it’s not individuals lending to individuals; nor is it businesses lending to businesses.

      Peer-to-business has the same ‘logic’ problem – who are the peers of a business? Other businesses surely?

      That having been said, in practice everyone seems to understand the term without problems…. and it’s what people understand by a word that’s important, not its etymology, surely?

      However, Crowdfunding is growing as a term to reflect the idea of groups of people lending to organisations – normally in the form of buying equity (crowdcube), or getting some fringe benefit (kickstarter.)

      I like the idea of a term that relates to crowdfunding – and crowdlending is the best of those I’ve heard so far for what Funding Knight does.

      Regards,

      Mark

  2. Pingback: Roundup of Social Lending News – August 18, 2012

  3. On balance I prefer crowdlending – it feels more accurate and should have longevity if the business model changes to lending to individuals as well – this is important as you do not want to keep reinventing the name/brand/sub-branding as you progress. The issue with peer to peer is that, strcitly speaking, its not peer to peer lending. For me peer to peer implies individuals to individuals. I too would caution against social lending as a term for the reasons already stated above. In the housing market we have a term ‘social housing’ which is housing for those who find it hard to get on the private housing ladder. Crowdlending also feels more modern and more relevant to the social media age.

  4. Thanks Davinder. You make a great point re. peer to peer not strictly applying to lending to businesses, this was one of things that niggled with me, too and the point re. avoiding confusion when mentioning ‘social lending’ is definitely one for the whole industry to beware of. After all, we’re trying to simplify things here, not add to the confusion!

  5. I realized I commented on twitter but not contributed my thoughts here as well.

    Thanks for bringing light to this. At first glance, to an observer, it may seem like we’re arguing semantics. But as the crowdfunding (oh dear, such a loaded term) industry blossoms, a clear and simple taxonomy will be critical to education and awareness efforts.

    I love the term “crowdlending.” Unfortunately, it’s difficult to integrate crowdlending into the “crowdfunding” family which includes (i) donation, (ii) perk/contribution, (iii) debt, (iv) equity, and (v) revenue share. On one hand, I would love to split debt out as its own category; on the other, I know the media will indiscriminately use “crowdfunding” in its coverage. I fear breaking away from this standard will merely add to the confusion.

    As for an alternative… I hope someone wiser than I opines because I’m just not sure. The option I have personally chosen is to preface crowdfunding with the type, i.e. donation crowdfunding, debt crowdfunding, etc. It’s a mouthful, but standardized and definitive.

    Full disclosure: I’m from across the pond – we’re way behind the curve on this ; )

    JS

    • Thanks Jonny. Not so sure you’re behind the curve across the pond… things seem to be moving fast.

      You’re right about the risk of confusion… and probably the fact that most people will just keep saying crowdfunding anyway. I guess we’ll just have to work hard to explain the difference between debt and equity funding.

      We’ve added it to our list of future blog topics so watch this space.

  6. Pingback: Crowdlending, crowdfunding and what will happen to bank lending? | FundingKnight: The Blog

  7. Pingback: Crowdlending vs. crowdfunding… what’s the difference and why does it matter? | FundingKnight: The Blog

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