Society One: only the beginning

With a business model that connects borrowers directly with lenders without needing a traditional financier, peer-to-peer lending has the potential to severely disrupt the banking sector.

Peer-to-peer (P2P) lending is poised to smash the traditional banking sector, as potentially powerfully as the disruptive technology of the internet has been to the communication sector. Using smart technology to match borrowers and lenders, without the co-mingling of risk that bedevils traditional banks, P2P lending provides the potential for lower interest rates for borrowers as well as better investor returns. P2P lending avoids the layers of costs, massive capital backing and complex business systems that traditional banks use to protect investors. It’s no wonder that Westpac recently invested $5m into start up Australian P2P lender Society One – emulating the rapid growth of P2P lending in the US and Europe: www.societyone.com.au ). Unfortunately the mechanism chosen by Society One to deliver its service adds some risk above that which ideally should exist in the “pure” P2P model – and potential investors need to be aware of how this can affect them.

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