Kristin Moyer

Kristin Moyer and Alistair Newton here.  This is what one of the media guys at our Spring Symposium told a Gartner analyst recently:  “You didn’t talk about Prosper in your presentation,” he said as he took of the analyst’s microphone. He had just taken in excess of $15,000 of his savings and put it into Prosper. “They just don’t get it, do they?” he said, waving at the throng of bank professionals departing the room after one session.

Here is his story.  He started slowly with peer-to-peer (P2P) lending through Prosper (a financial social network (FSN)), experimenting along the way.  At first, he lost some money.  Now, however, he is more than breaking even.  He wanted to get a better return than he was getting with his bank, so he took his money out of the bank and is now lending it on Prosper.

When comparing returns from P2P lending with the market or even with a deposit account, P2P doesn’t look like such a bad idea.  The market isn’t appealing for most investors right now, with the Dow down ~45% from its high last year.  True, banks have increased interest rates on deposits out of desperation to attract cash. In the UK, with central bank base rates at 3%, a number of banks continue to offer rates well in excess of 6.5%. However such an approach is sustainable for only a relatively short period of time.  Compare this with what some investors claim to be making on FSNs:  8%,  C 10%, 12%…  In fact, one FSN claims that member returns have actually increased as the financial market has melted down.

Banks, take note.  P2P lending through FSNs can start to look pretty good to weary consumers looking for an economic return when few places can provide one right now.