Download
HTML Embed
HTML EMBED
Click to Copy

Latest Episodes

Download
HTML Embed
HTML EMBED
Click to Copy
Make Me Smart with Kai and Molly
Download
HTML Embed
HTML EMBED
Click to Copy
Marketplace Morning Report
Download
HTML Embed
HTML EMBED
Click to Copy
Marketplace Morning Report
Download
HTML Embed
HTML EMBED
Click to Copy
Marketplace Morning Report
Download
HTML Embed
HTML EMBED
Click to Copy
Download
HTML Embed
HTML EMBED
Click to Copy
Download
HTML Embed
HTML EMBED
Click to Copy
Marketplace Morning Report
Download
HTML Embed
HTML EMBED
Click to Copy
Marketplace Morning Report
Download
HTML Embed
HTML EMBED
Click to Copy
Marketplace Morning Report
Download
HTML Embed
HTML EMBED
Click to Copy
Marketplace Tech

Peer-to-peer lending attracts institutional investors

Mark Garrison May 9, 2016
Share Now on:
HTML EMBED:
COPY
Lending Club Founder and CEO Renaud Laplanche, left, watches prices as his company lists on the New York Stock Exchange on Dec. 11, 2014. Laplanche resigned Monday.
DON EMMERT/AFP/Getty Images

The online loan platform Lending Club announced Monday that CEO Renaud Laplanche resigned after an internal review found the company’s business practices had been violated. It’s the latest bit of bad news for the industry many call peer-to-peer lending. Wall Street was once high on companies like Lending Club and Prosper, but not so much lately. And it turns out, the industry may not be as peer-to-peer as many people think.

The industry exploded in recent years as the old model of banks making loans on deposits didn’t work the same way in a time of risk-averse banks and low interest rates. A University of Cambridge report pegs peer-to-peer consumer lending at nearly $26 billion in America last year. That’s up from just under $3 billion in 2013. With big money comes big change. The name peer-to-peer doesn’t apply in the same way.

“If peer-to-peer originally meant person to a person, it’s definitely not person to person,” Wharton professor Keith Weigelt said.

The original idea was that regular folks who need money could go to Lending Club or Prosper and connect with regular folks who had money. That still happens, but these days, lots of money is coming in big blocks from big institutional investors.

“They basically want to get the maximum bang for their buck, so they are willing to take on this risk,”said Rajkamal Iyer, a finance professor at MIT’s business school.

But as all this money from professionals pours in, tiny individual investors may find themselves running with a much faster crowd when they’re picking and choosing the loans they back.

If you’re a member of your local public radio station, we thank you — because your support helps those stations keep programs like Marketplace on the air.  But for Marketplace to continue to grow, we need additional investment from those who care most about what we do: superfans like you.

Your donation — as little as $5 — helps us create more content that matters to you and your community, and to reach more people where they are – whether that’s radio, podcasts or online.

When you contribute directly to Marketplace, you become a partner in that mission: someone who understands that when we all get smarter, everybody wins.

We’re counting on you today!

Marketplace helps you stay financially responsible all year, now we need YOUR help to keep our budget on track.
Donate NOW to help us hit our target of 2,500 Marketplace Investors by June 30!