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Generally accepted definitions & characterEdit

According to some finance regulators, while a legal definition of Peer-to-Peer P2P Lending is not yet in existence[1], the World Intellectual Property Organization (WIPO) [2], the United States Patent and Trademark Office (USPTO)[3] the Canadian Intellectual Property Office (CIPO)[4] and the United States Government Accountability Office (GAO)[5] acknowledge that Peer-to-Peer (P2P) Lending (synonymous with the term Person-to-Person Lending[6], "Private Lending", "Cryptolending"), also known as P2P Lending [the obverse of Peer-to-Peer Investing, "Private Investing", "Cryptoinvesting"; also known as P2P Investing] is the "practice of lending/investing or borrowing money from one private individual (or person) [in the role of "lender", or "private lender[7]" or "P2P Lender" or "cryptolender"] to another private individual (or person) [in the role of "borrower", or "private borrower" or "P2P borrower" or "cryptoborrower"] [8] [9] [10].

While individual or private corporate participants in “Peer-to-Peer P2P, Private & Crypto-” financial activities are not subject to 3rd party disclosure[11]; “Peer-to-Peer P2P, Private & Crypto-” Lending (or the obverse: “Peer-to-Peer P2P, Private & Crypto-” Investing) transactions are classified as either "regulated" or "non-regulated" by government oversight[12]. Regulators acknowledge that “Peer-to-Peer P2P, Private & Crypto-” Lending/“Peer-to-Peer P2P, Private & Crypto-” Investing transactions may be originated (created) either directly through direct advertising by the P2P Lender (Investor) [13]; or, via an intermediary (a licensed or unlicensed broker)[14] or, via a technology platform[15].

Principle of synonymity[16]Edit

In accordance with dictionary and thesaurus definitions, the following terms are synonymous with another:

  • Peer-to-Peer P2P [17] (for example: peer-to-peer or P2P lender, peer-to-peer or P2P investor or peer-to-peer or P2P borrower)
  • Private[18] (for example: private lender, private investor or private borrower)
  • Crypto[19] (for example: cryptolender, cryptoinvestor or cryptoborrower); unlike the other terms, when the adjective "crypto" is applied, the resulting word is a "unitary[20]" word

North american industry classification system hierarchy[21] [22] [23]Edit




  Peer-to-Peer/Private/Crypto Finance - The adjectives of "peer-to-peer", "private" or "crypto" are applied to describe the attribution of being secretive or non-public.

Sub-sector (Activity):

  Peer-to-Peer/Private/Crypto Credit Intermediation
  Peer-to-Peer/Private/Crypto Securities and other financial investment

Industry (Service or Product):

  Peer-to-Peer/Private/Crypto Mortgages
  Peer-to-Peer/Private/Crypto Loans
  Peer-to-Peer/Private/Crypto Currency
  Peer-to-Peer/Private/Crypto Securities
  Peer-to-Peer/Private/Crypto Other assets/liabilities/equity/debt

Other countries or jurisdictions or economic zones have their own equivalent classes[24].

Priority, systems architecture, reference architecture, ontology, reference implementation, international standards benchmark, finance regulator & regulatory recognitionEdit

Priority, systems architecture, reference architecture, ontology, reference implementationEdit

The World Intellectual Property Organization (WIPO) [25], the United States Patent and Trademark Office (USPTO)[26] the Canadian Intellectual Property Office (CIPO)[27] and their international peer intellectual property organizations (member states)[28] incontestably [the word "incontestable" is legislatively defined, pursuant to Canada's (a WIPO Member State[29]) Federal Trade-marks Act R.S.C., 1985, c. T-13)[30]] recognize (pursuant to international treaties and conventions[31]) that the world's first commercially deployed peer-to-peer P2P finance network (also known as a "private finance network" or "cryptofinance network") trading in both government regulated (regulated) [including the world's first Peer-to-Peer P2P (private or crypto-) regulated mortgage instrument, registered as the trademarked brand: BITMORTGAGE®[32] [33] [34]] and non-government regulated (non-regulated) peer-to-peer P2P (private and crypto-) financial instruments is named PrivateLender.Org: Canada's Private Lending Network®[35] which was registered with the Internet Corporation for Assigned Names and Numbers[36] and activated for global public use on April 9, 2005 [37].

The systems architecture, reference architecture, ontology (state and dynamic[38] [39]) and reference implementation related to the trade of both regulated and non-regulated peer-to-peer P2P (private and crypto-) financial instruments was first identified in a proprietary dissertation entitled: “Binary Digit Debt: A Peer-to-Peer Electronic Debt System”; a system built on seminal blockchain technology developed by Anoop Bungay in the early 2000s[40] - at least 3 years, 4 months and 10 days prior (from the date that Canada's Private Lending Network® was activated)[41] [42] to the date "Satoshi Nakamoto" registered the internet domain [43] (pursuant to registration with the Internet Corporation for Assigned Names and Numbers[44]; and at least 3 years, 6 months and 10 days prior to the date "Satoshi Nakamoto" published the white paper "Bitcoin: a Peer-to-Peer Electronic Cash System" in the Metzger, Dowdeswell & Co. LLC[45] “Cryptography Mailing List” on Friday, October 31 at 14:10:00 EDT in 2008[46]; and at least 3 years, 7 months and 30 days prior to the date "Satoshi Nakamoto" published the announcement of the release of the Peer-to-Peer Electronic Cash System computer program named: “Bitcoin v0.1 released” on Thursday January 8 at 14:27:40 EST in 2009.[47]

The term "Private Lending Pyramid™" was coined by Anoop Bungay and published during a presentation of peers at Simon Fraser University on December 7, 2009[48]. The Private Lending Pyramid™ functions as a trademark and source identifier in order to distinguish itself [pursuant to United States Patent and Trademark legislation[49]] from the general systems architecture that describes the relationships and hierarchy between Private Lenders (synonymous with "Peer-to-Peer P2P Lenders") and four other capital sources [developed on the basis of Ontology "ontological principles"]: "Banks"; "Trust Companies, other Institutional Lenders"; "General marketplace: brokers, professionals, media"; "Friends, family, co-workers, generic investors", "Private Lenders"[50].

International standards benchmarkEdit

Continuously from May 9, 2008 until at least May 9, 2018[51], the systems architecture, reference architecture along with the ontology and reference implementation contained in the "Binary Digit Debt: A Peer-to-Peer Electronic Debt System" body of work became the international benchmark for trust and safety in Peer-to-Peer P2P finance (Private Finance and Cryptofinance) transactions through registration to the Geneva-based International Organization for Standardization (ISO)[52] ISO 9001:2000, ISO 9001:2008 and ISO 9001:2015; the international standards for Quality Management Systems, and the National Standard for 119 countries[53].

Specifically, the ISO 9001:2015 Quality Management Systems Standard serves as the National Standard for over 119 countries [54] including: Australia (AU[55]), Canada (CA), China (CN) United Kingdom (UK), United States of America (USA). Registration to an ISO 9001 standard provides at-a-glance confidence to legislators, regulators, regulatees, customers, prospective customers, stakeholders, interested parties[56] and consumers, "that they can have confidence that their products are safer, reliable and of good quality"[57].

Government, finance regulator & regulatory recognition (international, national & regional)Edit

With over 10 years of continuous registration to the International Standard [58]; International, National and Regional finance regulators in at least 119 member countries[59] of the International Organization of Standardization - which rely on International Standards for market efficacy and consumer safety pursuant to in-country legislation, namely:

  • USA: National Technology Transfer and Advancement Act (Public Law 104-113)[60]
  • Canada: Cabinet Directive on Regulatory Management; Her Majesty the Queen in Right of Canada, 2012[61]
  • United Kingdom (UK): By Royal Charter[62]: British Standards Institution
    King George IV: Westminster (Parliament of the United Kingdom), 22 April, 1929; original Charter.
    Elizabeth II: Westminster (Parliament of the United Kingdom), 5 November, 1931; 1968, 1974; Supplemental Charters.

Recognize that Canada’s Private Lending Network® - as the world's first and only peer-to-peer P2P, Private and Cryptofinance system with over 10 years of continuous National and International standards-based financial operation - serves as the benchmark standard for “better, safer and more efficient methods and products” [63] in the domain of peer-to-peer, private and cryptofinance.

Regulatory Organizations (or their member entities) that are affected by National and International Standards-based peer-to-peer P2P, private or cryptofinance include:

  • International Organization of Securities Commissions (IOSCO)[64]
  • The World Federation of Exchanges (WFE)[65]
  • Bank for International Settlements (BIS)[66]
  • North American Securities Administrators Association (NASAA)[67]
  • G20[68]
  • G7

Confusion between "Peer-to-Peer, Crowdfunding and Marketplace" FinanceEdit

Global regulators including Australia, UK and USA regulators recognize that Peer-to-Peer activities are distinct from what is called "crowdfunding" and "Marketplace lending"; based upon the Distinctiveness/Descriptiveness Continuum (DDC) principles established by the United States Patent and Trademark Office [69] which includes: ingredient, quality, characteristic, function, feature, purpose, or use of the specified goods or services.[70].

Australia regulator (ASIC)Edit

Applying the principles of DDC, Australian regulators namely, the Australian Securities & Investments Commission (ASIC) [71] recognize that many online platforms that claim to be "peer-to-peer" in quality, characteristic or function are not; viz.: "Although some forms of marketplace lending have often been referred to as 'peer-to-peer lending' or 'P2P', we consider 'marketplace lending' more appropriately describes these lending arrangements, and encourage the use of this term"[72].

UK regulator (FCA)Edit

The Financial Conduct Authority of UK (FCA) [73] also acknowledges that when organizations raise funds from the public, in a pooled manner, the appropriate overarching terminology is "crowdfunding"[74]. The FCA refers to online platforms for investing not as "Peer-to-Peer P2P Lending platforms", but rather, "crowdfunding platforms" [75]. Further, FCA expressly states [in its 2014 Policy Paper entitled: "The FCA’s regulatory approach to crowdfunding over the internet, and the promotion of non-readily realisable securities by other media Feedback to CP13/13 and final rules"[76]] that the appropriate term for firms who operate or plan to operate "P2P" platforms is "loan-based crowdfunding platforms"[77]. The FCA further refers to the industry as a whole, as the "regulated loan-based crowdfunding sector"[78]

USA GAO and regulator (SEC®)Edit

The USA Securities and Exchange Commission (SEC®)[79] define online lending platforms as "crowdfunding"[80], not Peer-to-Peer P2P Lending, because of the presence of an intermediary, namely the "platform" which issues securities to an investor in exchange for investment capital. The intermediary issues the loan, not the investor; viz: "lenders do not make loans directly to borrowers. Rather, lenders purchase payment-dependent notes that correspond to the selected borrower loans [81]". The US Government Accountability Office (GAO) [82] confirms that there is a greater degree of risk associated with online platforms because "lenders have no direct recourse to the borrowers to obtain loan payments, so their returns depend on the success of the platforms and their collection agents in obtaining repayments from borrowers."[83] The inference is apparent, namely: If the success of an investment is based upon a third party, then it is not a "peer-to-peer" investment, since the two individuals have no direct relationship with one another.

General historyEdit

Early peer-to-peer lending was also characterized by disintermediation and reliance on social networks. While it is still true that the emergence of internet and e-commerce makes it possible to do away with traditional financial intermediaries and that people may be less likely to default to the members of their own social communities, the emergence of new intermediaries has proven to be time and cost saving.[citation needed]

Most peer-to-peer intermediaries provide the following services:[citation needed]

  • online investment platform to enable borrowers to attract lenders and investors to identify and purchase loans that meet their investment criteria[citation needed]
  • development of credit models for loan approvals and pricing[citation needed]
  • verifying borrower identity, bank account, employment and income[citation needed]
  • performing borrower credit checks and filtering out the unqualified borrowers[citation needed]
  • processing payments from borrowers and forwarding those payments to the lenders who invested in the loan[citation needed]
  • servicing loans, providing customer service to borrowers and attempting to collect payments from borrowers who are delinquent or in default
  • legal compliance and reporting[citation needed][citation needed]
  • finding new lenders and borrowers (marketing)[citation needed]

Country experiencesEdit

United KingdomEdit

The first company to offer peer-to-peer loans in the world was Zopa. Since its founding in February 2005, it has issued over £1.99 billion in loans.[84] Funding Circle became the first significant peer-to-business lender launching in August 2010 and offering small businesses loans from investors via the platform.[85] Funding Circle has lent over £1.93 billion as of January 2017.[86][87] Both Zopa and Funding Circle are members of the Peer 2 Peer Finance Association (P2PFA).[88]

In 2011, Quakle, a UK peer-to-peer lender founded in 2010, closed down with a near 100% default rate after attempting to measure a borrower's creditworthiness according to a group score, similar to the feedback scores on eBay; the model failed to encourage repayment.[89][90]

By June 2012, the top three peer-to-peer companies in the UK - RateSetter, Zopa, and FundingCircle - had issued over £250 million of loans.[91] In 2014 alone, they issued over £700 million.[92]

In 2012, the UK government invested £20 million into British businesses via peer to peer lenders. A second investment of £40 million was announced in 2014.[93] The intention was to bypass the high street banks, which were reluctant to lend to smaller companies. This action was criticised for creating unfair competition in the UK, by concentrating financial support in the largest platforms.[94]

Investments have qualified for tax advantages through the Innovative Finance Individual Savings Account (IFISA) since April 2016.[95] In 2016, £80bn was invested in ISAs,[96] creating a significant opportunity for P2P platforms. By January 2017, 17 P2P providers were approved to offer the product.[97]

Many more peer-to-peer companies have also set up in the UK. At one stage there were over 100 individual platforms applying for FCA authorisation, although many have now withdrawn their applications.[98]

Since April 2014, the peer-to-peer lending industry has been regulated by the Financial Conduct Authority[99] to increase accountability with standard reporting and facilitate the growth of the sector.[100] Peer-to-peer investments do not qualify for protection from the Financial Services Compensation Scheme (FSCS), which provides security up to £75,000 per bank, for each saver,[101] but regulations mandate the companies to implement arrangements to ensure the servicing of the loans even if the platform goes bust.[102]

In 2015, UK peer-to-peer lenders collectively lent over £3bn to consumers and businesses[103] although on an annual equivalent basis the value of the loan book figure was £2.3bn in 2015 which increased to £3.2bn in 2016.[104]

According to the Cambridge Centre for Alternative Finance (Entrenching Innovation Report), £3.55B was attributed to Peer to Peer alternative finance models, the largest growth area being property showing a rise of 88% from 2015 to 2016.

United StatesEdit

The peer-to-peer lending industry in the US started in February 2006 with the launch of Prosper, followed by Lending Club and other lending platforms soon thereafter.[105] Both Prosper and Lending Club are located in San Francisco, California.[106] Early peer-to-peer platforms had few restrictions on borrower eligibility, which resulted in adverse selection problems and high borrower default rates. In addition, some investors viewed the lack of liquidity for these loans, most of which have a minimum three-year term, as undesirable.[107]

In 2008, the Securities and Exchange Commission (SEC) required that peer-to-peer companies register their offerings as securities, pursuant to the Securities Act of 1933.[105][108] The registration process was an arduous one; Prosper and Lending Club had to temporarily suspend offering new loans,[109][110][111][112] while others, such as the U.K.-based Zopa Ltd., exited the U.S. market entirely.[109] Both Lending Club and Prosper gained approval from the SEC to offer investors notes backed by payments received on the loans. Prosper amended its filing to allow banks to sell previously funded loans on the Prosper platform.[107] Both Lending Club and Prosper formed partnerships with FOLIO Investing to create a secondary market for their notes, providing liquidity to investors.[113] Lending Club had a voluntary registration at this time, whereas Prosper had mandatory registration for all members.[114]

This addressed the liquidity problem and, in contrast to traditional securitization markets, resulted in making the loan requests of peer-to-peer companies more transparent for the lenders and secondary buyers who can access the detailed information concerning each individual loan (without knowing the actual identities of borrowers) before deciding which loans to fund.[109] The peer-to-peer companies are also required to detail their offerings in a regularly updated prospectus. The SEC makes the reports available to the public via their EDGAR (Electronic Data-Gathering, Analysis, and Retrieval) system.

More people turned to peer-to-peer companies for lending and borrowing following the financial crisis of late 2000-s because banks refused to increase their loan portfolios. On the other hand, the peer-to-peer market also faced increased investor scrutiny because borrowers' defaults became more frequent and investors were unwilling to take on unnecessary risk.[115]

As of June 2012, Lending Club is the largest peer-to-peer lender in US based upon issued loan volume and revenue, followed by Prosper.[105][106] Lending Club is currently also the world's largest peer-to-peer lending platform.[116] The two largest companies have collectively serviced over 180,000 loans with $2 billion in total:[91][105][106] as of March 22, 2012, Lending Club has issued 117,412 loans for $1,512,560,075[117] while Prosper Marketplace has issued 63,023 loans for $433,570,651.[118] With greater than 100% year over year growth, peer-to-peer lending is one of the fastest growing investments.[105] The interest rates range from 5.6%-35.8%, depending on the loan term and borrower rating.[119] The default rates vary from about 1.5% to 10% for the more risky borrowers.[106] Executives from traditional financial institutions are joining the peer-to-peer companies as board members, lenders and investors,[91][120] indicating that the new financing model is establishing itself in the mainstream.[108]


In recent years a very large number of micro loan companies have emerged to serve the 40 million SMEs, many of which receive inadequate financing from state-owned banks, creating an entire industry that runs alongside big banks.

As the Internet and ecommerce took off in the country in the 2000s, many P2P lenders sprung into existence with various target customers and business models.[121]

The first P2PL in Hong Kong is WeLab, which has backing from American venture capital firm Sequoia Capital and Li Ka-Shing's TOM Group.[122]

Ezubao, a website launched by Yucheng Group in July 2014 purporting to offer P2P services, was shut down in February 2016 by authorities who described it as a Ponzi scheme.[123] As 900,000 customers had invested 50 billion renminbi in Ezubao, its closure might undermine confidence in P2P in China.[124]

In China, in 2016 there were more than 4000 P2P lending platform in total, but 2000 of them had already suspended operations.[125] As of August 2016, cash flow on all P2P lending platform have already exceeded 191 billion Chinese Yuan (29 billion USD) in the month.[126] Lender's return rate across all P2P lending platform in China is about 10% per annum on average, with a few of them offering more than 24% return rate.[127] A colloquial term for P2P lending in Chinese translates as "grey market", but is not to be confused with grey markets for goods or an underground economy.


In 2012 Australia's first peer to peer lending platform, SocietyOne, was launched.[128] As of June 2016 the Australian Government has been encouraging the development of FinTech and peer to peer lending startups through its 'regulatory sandbox' program.[129]

New ZealandEdit

In New Zealand, peer-to-peer lending became practicable on April 1, 2014, when the relevant provisions of the Financial Markets Conduct Act 2013 came into force. The Act enables peer-to-peer lending services to be licensed.

The Financial Markets Authority issued the first peer-to-peer lending service licence on July 8, 2014, to Harmoney.[130] Harmoney officially launched its service on October 10, 2014.[131] Squirrel Money followed about a year later, launching in November 2015.


In India, peer-to-peer lending is currently unregulated. The Reserve Bank of India, India's Central Bank, has published a consultation paper on regulation of P2P lending[132] and the final guidelines are expected soon.[133][134] The RBI has regulated that all the registered NBFC-P2P must have a net owned fund of not less than 2 crores. This is necessary for the encouragement of the credibility of the industry.[135] There were over 30 peer-to-peer-lending platforms in India in 2016.[136] Even with first-mover advantage many sites were not able to capture market share and grow their user base, arguably because of the reserved nature of Indian investors or lack of awareness of this type of debt financing. However, peer-to-peer lending platforms in India are helping a huge section of borrowers who have previously been rejected or have failed to qualify for a loan from banks.[137] Peer to peer lending has helped consumers with no or poor credit scores get loans in categories such as consumer lending, small business lending and property lending.[138] After regulation by the Reserve Bank of India begins, the peer to peer lending industry in India is expected to grow.


Peer-to-peer-lending in Sweden is regulated by Finansinspektionen.[139] Launched in 2007, the company Trustbuddy AB was first out on the Swedish market for peer-to-peer-lending, providing a platform for high risk personal loans between 500SEK and 10,000SEK. Trustbuddy filed for bankruptcy by October 2015, a new board cited abuses by outgoing leadership.


Several peer-to-peer lending services initiated operation and loan origination during 2014, Following the economic uprising of 2011,[140] and public opinion regarding these platforms is positive. The maximum interest rate in Israeli P2P Arenas is limited by the "Extra-Banking Lending Regulations".[141]


Peer-to-Peer P2P Lending for both real estate-secured and non-real estate-secured transactions by either investors or borrowers, is a mature industry in Canada. Peer-to-Peer P2P Lending in real estate-secured transactions is regulated by members of the Mortgage Broker Regulators' Council of Canada (MBRCC) [142], including: the Financial Services Commission of Ontario (FSCO) [143], the Real Estate Council of Alberta (RECA) [144] and the Financial Institutions Commission of British Columbia (FICOM BC)[145]. Starting as early as April 09, 2005 Canada's Private Lending Network® is incontestably [the word "incontestable" is legislatively defined, pursuant to Canada's Federal Trade-marks Act R.S.C., 1985, c. T-13)[146]] recognized by Canadian federal government public records[147] as Canada's first network devoted to peer-to-peer P2P Lending in both regulated mortgages (real-estate secured) and non-regulated loans (non-real-estate secured). Proof of federal recognition, registration and "date of first use as April 09, 2005" is found at the Canadian Intellectual Property Office (CIPO)[148]. Since inception, member individuals and organizations who use the Canada's Private Lending Network® platform are continuously registered with Canadian federal or provincial mortgage securities regulators including (but not limited to): the Financial Services Commission of Ontario (FSCO) [149], the Real Estate Council of Alberta (RECA) [150] and the Financial Institutions Commission of British Columbia (FICOM BC)[151]. Canada's Private Lending Network® has the further distinction of being the world's first and only peer-to-peer P2P network with continuous registration to ISO 9001:2015[152] since May 9, 2008[153]. ISO 9001:2015 is published by the International Organization for Standardization [154] and is the National Standard for Quality Management Systems in 119 countries[155] and registration thereto provides legislators, regulators, customers, prospective customers and other interested parties with at-a-glance "confidence that their products are safe, reliable and of good quality."[156]. Canadian Capital Markets Securities Regulators (members of the Canadian Securities Administrators [157]) are recent entrants to Canadian Peer-to-Peer P2P Lending and are only issuing interim approvals " order to test their products, services and applications throughout the Canadian market on a time limited basis.[158], through "Regulatory Sandbox" programs including the CSA Regulatory Sandbox[159] and the Ontario Securities Commission Sandbox, branded as "OSC Launchpad"[160].


In Brazil, the lack of credit scenario and the rise of interest rates began to make room for a loan market on the internet.[161]

To operate in the country, these companies need to comply with certain rules of the domestic financial market. While in most countries the peer-to-peer lending operations are carried out without the intermediation of a financial institution, in Brazil that is not possible. To stick to the rules, the platforms need to act as a correspondent bank, helping to structure a loan that is accomplished, in fact, by the partner bank.[161]


In Latvia, peer-to-peer lending market is shared by two platforms, Mintos and TWINO, both established in 2015. In the first three quarters of 2016, both platforms showed highest growth rates among peer-to-peer lending platforms in Continental Europe. As a result, Latvia ranked third in peer-to-peer consumer lending market volume in Continental Europe with EUR 107.3 million funded through Latvia-based peer-to-peer platforms in the first three quarters of 2016.[162]

When Mintos entered the market they decided to offer secured loans. Up to that moment, this had not been done on a large scale yet in the p2p lending market. And Mintos, therefore, created a great new addition to these loans. 100% Buyback guarantee secured loans will net you, as an investor, less interest than unsecured loans, but it will greatly reduce your risk as Mintos will buy back the loan whenever the borrower defaults on his payment obligations for 60 days or more.[163]

In 2015, the Ministry of Finance of Latvia initiated development of a new regulation on the peer-to-peer lending in Latvia to establish regulatory requirements, such as rules for management compliance, AML requirements and other prudential measures.[164]


Ireland's first and largest P2P lending platform is Linked Finance[165]. Launched in 2013, the online marketplace connects Irish businesses who need loans with Ireland's largest online lending community. In 2016, Linked Finance was also authorised to operate in the UK by the Financial Conduct Authority[166].

In 2017, Linked Finance completed its 1000th loan [167] and appointed a new Chairman, former Ryanair Deputy CEO, Michael Cawley[168]. Following this, the company also raised €2 million in equity investment to support its plans for expansion[169].

Other platforms in Ireland include Grid Finance and Flender. Grid Finance launched in 2014 and Flender launched in 2017, both focused on raising funding for SMEs. Flender made headlines when they crowdfunded €573,000 for a 10% stake in the company[170]. Flender has also been authorised for operations in the UK market by the FCA.

Linked Finance publishes key marketplace metrics on its site and, as of February 2018, was the only Irish platform listed on the International P2P Lending Volumes report[171]


In Indonesia, P2P lending is growing fast in recent years and is regulated under OJK since 2016. As of Dec 2017, there are 22 P2P platforms registered in OJK.[citation needed] P2P platforms provide loans in particular targeting into unbanked population, which is estimated around 100+ million in Indonesia.


There is no specific Peer-to-Peer lending regulation in Bulgaria. Currently, Klear is the only Bulgarian platform. It was launched in 2016 and provides personal loans to prime customers. The Peer-to-Peer lending platform is operated by Klear Lending AD, a financial institution registered in the Register per art. 3a of the Credit Institutions Act maintained by the Bulgarian National Bank.[172]


In Korea, Money Auction and Pop Funding are the very first peer to peer lending companies founded in 2006 and 2007 respectively.[173] Korean P2P lending industry did not attract much public attention until late 2014 and early 2015, during which period a number of new fintech companies were founded underpinned by the global fintech wave with the emergence of Lending Club as the mainstream P2P lending player in the US. New P2P lending companies launched in Korea during this period include 8 Percent, Terafunding, Lendit, Honest Fund and Funda.[174] At the beginning, 8 Percent, Lendit and Honest Fund focused on personal loan origination and Terafunding was the only P2P platform dedicated to the real estate backed loan origination, founded by ex-real estate broker and investor, Tae Young Yang.

There was a brief period of regulatory uncertainty on the P2P business model as the P2P lending model was not officially legalized under the then regulatory regime. 8 percent was briefly shut down by the regulator in Feb 2015 and was reopened again.[175] Korean P2P industry saw an explosive growth in a year. According to the regulator, cumulative P2P lending platform loan origination increased to KRW 311,800,000,000 as of December in 2016 from KRW 72,400,000,000 in March and there was a debate as to whether the industry was getting overheated, with questions on whether the industry offered appropriate investor protection.[176] To respond to these concerns, as of February 2017, Korean regulator imposed an annual investment limit of KRW 10,000,000 for a retail investor on these lending platforms, and KRW 40,000,000 for certain qualified investors.[177]

As of April 2017, there are 148 P2P lending companies in Korea. However, only 40 companies are official members of the Korea P2P Finance Association. These members include Lendit, Roof Funding, Midrate, HF Honest Fund, Villy, 8 Percent, Terafunding, Together Funding and People Funding.[178] According to the Korea P2P Finance Association, cumulative loan lent by its member P2P companies stands at c. KRW 2.3 TRN as of March 2018. By origination category, real estate project financing origination constitutes c. KRW 768,500,000,000, real estate asset backed origination is KRW 611,500,000,000, other asset backed KRW 472,400,000,000 and personal loan origination stands at KRW 443,200,000,000.[179] Average interest yield offered by the member companies is 14.32%.

In Korea, Terafunding is a market leader by volume with KRW 323Bn cumulative loan originated up to March 2018[180] and Terafunding is the first peer to peer lending platform to launch retail P2P linked fund in partnership with Korean retail banks, Industrial Bank of Korea and Kyongnam Bank.[181]

P2P CompaniesCumulative Loan Origination Amount as of March 2018[182]

1         Terafunding                 KRW 323 Bn

2         Roof Funding               KRW 184 Bn

3         People Fund                 KRW 178 Bn

4         Together Funding          KRW 142 Bn

5         Honest Fund                KRW 124 Bn

(As Published by the Korea P2P Finance Association)

Legal regulationEdit

In many countries, soliciting investments from the general public is considered illegal. Crowd sourcing arrangements in which people are asked to contribute money in exchange for potential profits based on the work of others are considered to be securities.

Dealing with financial securities is connected to the problem about ownership: in case of person-to-person loans, the problem of who owns the loans (notes) and how that ownership is transferred between the originator of the loan (the person-to-person lending company) and the individual lender(s).[110][111] This question arises especially when a peer-to-peer lending company does not merely connect lenders and borrowers but also borrows money from users and then lends it out again. Such activity is interpreted as a sale of securities, and a broker-dealer license and the registration of the person-to-person investment contract is required for the process to be legal. The license and registration can be obtained at a securities regulatory agency such as the U.S. Securities and Exchange Commission (SEC) in the U.S., the Ontario Securities Commission in Ontario, Canada, the Autorité des marchés financiers in France and Québec, Canada, or the Financial Services Authority in the UK.

Securities offered by the U.S. peer-to-peer lenders are registered with and regulated by the SEC. A recent report by the U.S. Government Accountability Office explored the potential for additional regulatory oversight by Consumer Financial Protection Bureau or the Federal Deposit Insurance Corporation, though neither organization has proposed direct oversight of peer-to-peer lending at this time.[183] In 2016, New York state sent "warning letters" threatening to require 28 peer-to-peer lenders to obtain a license to operate unless they "immediately" complied with responses to demands to disclose their lending practices and products available in the state.[184]

In the UK, the emergence of multiple competing lending companies and problems with subprime loans has resulted in calls for additional legislative measures that institute minimum capital standards and checks on risk controls to preclude lending to riskier borrowers, using unscrupulous lenders or misleading consumers about lending terms.[185]

Advantages and criticismEdit

Interest ratesEdit

One of the main advantages of person-to-person lending for borrowers can sometimes be better rates than traditional bank rates can offer.[186] The advantages for lenders can be higher returns than obtainable from a savings account or other investments, but subject to risk of loss, unlike a savings account.[187] Interest rates and the methodology for calculating those rates varies among peer-to-peer lending platforms. The interest rates may also have a lower volatility than other investment types.[188]

Socially-conscious investmentEdit

For investors interested in socially conscious investing, peer-to-peer lending offers the possibility of supporting the attempts of individuals to break free from high-rate debt, assist persons engaged in occupations or activities that are deemed moral and positive to the community, and avoid investment in persons employed in industries deemed immoral or detrimental to community.[189][190]

Credit riskEdit

Peer-to-peer lending also attracts borrowers who, because of their credit status or the lack thereof, are unqualified for traditional bank loans. Because past behavior is frequently indicative of future performance and low credit scores correlate with high likelihood of default, peer-to-peer intermediaries have started to decline a large number of applicants and charge higher interest rates to riskier borrowers that are approved.[115] Some broker companies are also instituting funds into which each borrower makes a contribution and from which lenders are recompensed if a borrower is unable to pay back the loan.[89]

It seemed initially that one of the appealing characteristics of peer-to-peer lending for investors was low default rates, e.g. Prosper's default rate was quoted to be only at about 2.7 percent in 2007.[187]

The actual default rates for the loans originated by Prosper in 2007 were in fact higher than projected. Prosper's aggregate return (across all credit grades and as measured by, based upon actual Prosper marketplace data) for the 2007 vintage was (6.44)%, for the 2008 vintage (2.44)%, and for the 2009 vintage 8.10%. Independent projections for the 2010 vintage are of an aggregate return of 9.87.[191] During the period from 2006 through October 2008 (referred to as 'Prosper 1.0'), Prosper issued 28,936 loans, all of which have since matured. 18,480 of the loans fully paid off and 10,456 loans defaulted, a default rate of 36.1%. $46,671,123 of the $178,560,222 loaned out during this period was written off by investors, a loss rate of 26.1%.[192]

Since inception, Lending Club’s default rate ranges from 1.4% for top-rated three-year loans to 9.8% for the riskiest loans.[106]

The UK peer-to-peer lenders quote the ratio of bad loans at 0.84% for Zopa of the £200m during its first seven years of lending history. As of November 2013, Funding Circle’s current bad debt level was 1.5%, with an average 5.8% return after all bad debt and fees. This is comparable to the 3-5% ratio of mainstream banks and the result of modern credit models and efficient risk management technologies used by P2P companies.[90]

At the other end of the range are places such as Bondora that do lending to less credit-worthy customers, with default rates varying up to as high as 70+% for loans made to Slovak borrowers on that platform, well above those of its original Estonian market.

Government protectionEdit

Because, unlike depositors in banks, peer-to-peer lenders can choose themselves whether to lend their money to safer borrowers with lower interest rates or to riskier borrowers with higher returns, in the US peer-to-peer lending is treated legally as investment and the repayment in case of borrower defaulting is not guaranteed by the federal government (U.S. Federal Deposit Insurance Corporation) the way bank deposits are.[193]

A class action lawsuit, Hellum v. Prosper Marketplace, Inc. was held in Superior Court of California on behalf of all investors who purchased a note on the Prosper platform between January 1, 2006 and October 14, 2008. The plaintiffs alleged that Prosper offered and sold unqualified and unregistered securities, in violation of California and federal securities laws during that period. Plaintiffs further allege that Prosper acted as an unlicensed broker/dealer in California. The Plaintiffs were seeking rescission of the loan notes, rescissory damages, damages, and attorneys' fees and expenses.[194] On July 19, 2013 the class action lawsuit was settled. Under the settlement terms Prosper will pay $10 million to the class action members.[195]

List of peer-to-peer lending sponsorsEdit

Peer-to-peer lending sponsors are organizations that handle loan administration on behalf of others including individual lenders and lending agencies, but do not loan their own money. [196][197]

See alsoEdit


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