Peer-to-peer lending will tap $10 trillion unused capital: CommonBond fireside chat

Does information technology make large scale financial intermediaries less and less necessary? The San Francisco team behind peer-to-peer lending platform Prosper seems to think it does.

David Klein, CEO of CommonBond, welcomed Ron Suber, global sales lead at Prosper, to the grad student lending company’s Fall Fireside Chat at their downtown headquarters last week. The evening was largely a networking gathering, but also featured a talk on peer-to-peer lending, in which Suber explained how and why his partners took over the San Francisco marketplace for borrowers and lenders this year, why and their focus going forward.

Klein said the more than 50 attendees Tuesday night were a third MBAs, a third financial technology professionals and a third “interested corporates,” people interested in the space CommonBond is occuppying. Photos from CommonBond at the event here.

“We’re really a big data company,” Suber said, adding, “We never could have done this the way we do it today based on technology five years ago.”

Some takeaways from his talk and subsequent Q&A:

• Suber fielded several questions about why they don’t get into new areas of lending, such as small business lending, but Suber advised entrepreneurs not to get distracted by other possibilities. He said entrepreneurs should stay focused on their thing. For his company, he said, “We literally think this is a billion dollar company next year if we just do what we are doing.”
• Prosper‘s goal is to unlock all the un-invested cash in America. He described $10 trillion as “sitting on the sidelines” here.
• “Peer-to-peer in general is the thing that’s going to disrupt finance as we know it.”
• He described a future in which ATM machines will have “borrow” and “lend” buttons.
• Prosper‘s chief competitor is Lending Club. Prosper has grown from roughly a tenth their size to a fifth. He described Prosper‘s risk model as deeper than Lending Club‘s, giving them an advantage in pricing credit.
• He boasted about a lot of transparency on their site for lenders in seeing what the default rate is at different tiers of consumer lending.
• After several questions about defaults, Suber said, “I think rates are too high because too few people are defaulting.” Explaining that it shows there is more appetite for lending out there than the platform is able to meet at the current rates.
• Prosper is not, itself, a lender. It’s a platform for lenders and borrowers to connect. They believe this helps them avoid conflicts-of-interest.

For more information about CommonBond, visit our Q&A with David Klein. The company recently added its eleventh employee.