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P2P trio set for debut; Igrin's two year view

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A commercial model of peer-to-peer or social lending is emerging in Australia and New Zealand with three new internet-based projects coming to market over the next few weeks. All three leverage the "web 2.0” phenomenon of social networking sites.
First to market may be Sydney-based Igrin Pty Ltd which soft launched www.igrin.com.au in October, although the service is not fully operational.

In New Zealand, www.nexx.co.nz have announced they will be up and running soon.

They will be joined before the end of the year by www.peermint.com which will operate in Australia, New Zealand and Canada.
All three are based on the successful social lending models pioneered in Britain by Zopa and in north America by Prosper, Community Lend and Lending Club.

Zopa claims to have 135,000 members and a default rate of 0.2 per cent. Zopa have plans to franchise their brand to an Australian operator, but those plans seem to have been put on the backburner. The Australian domain name name www.zopa.com.au has been purchased by technology investment company Netus.

Rumours suggest that eBay/Paypal are also working up a capacity for P2P lending.

A recent internet survey in the UK by the Social Futures Observatory claims that 74 per cent of respondents said they would consider using the peer to peer model to borrow or lend money.

IGRIN TAKE A TWO YEAR VIEW

Igrin is the brainchild of a group of four bank and accounting executives led by former Commonwealth Bank executive manager Phillip Hopper. The company secretary is Geoff Kelly. Documents lodged with ASIC suggest the group has invested just $210,000 in the project to date and are now finalising regulatory issues and testing the system.

Hopper said there have been a number of state and federal laws they have had to work out compliance plans for including the consumer credit code, anti-money laundering laws and the need for an Australian Financial Services Licence.

Said Hopper: "One of the core concepts around P2P lending is that it needs to be a more efficient process than that undertaken by banks and financial institutions. Depending on the process and products used your regulatory overheads start to make the processes less efficient and thus drive up the cost of the service.”

Getting to market first was important to Hopper, and may explain why they are now claiming that mantle without yet having brokered a single loan.

"It was our intention to be the first to market in Australia and continue to take a leading role in the development of P2P,” said Hopper.

"Our estimates are that this will take 18 to 24 months for the Australian public to become aware of P2P and move from being an innovative new product and into the mainstream of financial services.”

Igrin at this stage says it will broker loans with a value of between $2000 to $25,000 for any purpose. Borrowers place ads on the Igrin website for a loan with the maximum interest rate they are prepared to pay and explaining the purpose of the loan.

The P2P operator charges a fee of one per cent or two per cent of the total loan amount depending on their credit rating plus any late payment fees. Igrin registers all loan applications with Veda Advantage.

Lenders can invest between $100 and $25,000 and "bid” on each application with the amount of credit they are prepared to supply and the lowest interest rate they are prepared to accept. Igrin charges lenders fees of 0.5 per cent.

Igrin compulsorily spreads the funds of each lender thinly between borrowers to contain risk. All loans are for terms of three years.

www.thesheet.com

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Jason Bryce Of The Sheet
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