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?