So, why not?

Just idly musing at what could be the most outrageous business idea.

Peer to peer payday lending over a website?

31 thoughts on “So, why not?”

  1. That was the one that prompted the thought. Because they’ve just found a great gaping hole in the accounts…..

  2. Has anyone actually invested money in any of these peer to peer lending sites? I have avoided them up until now.

  3. If you want to do peer to peer lending, why do it online? There are probably people within a couple of hundred yards of where you live or work who could do with a tide-me-over and it seems to me that you’re a lot less likely to lose your wedge that way.

  4. Put some money in Zopa, when they first started. It’s still in there.
    I’ve been using the Transferwise, peer-to-peer foreign exchange transfer service, of late. Saves me a fortune. And if you’re used to British banks, their efficiency is positively startling.
    What we need’s a peer-to-peer bank. Could you leverage up a payday loan co to that? Go from borrowing long, lending short* to borrowing short, lending long? Pretty well everything else banks do for the ordinary punter is cheap software solutions sold ruinously expensively. I can imagine a credit card that’s also a savings vehicle.

    * I s’pose borrowing short, lending even shorter might be more in the spirit of peer-to-peer pay-day lending.

  5. @Interested
    “There are probably people within a couple of hundred yards of where you live or work who could do with a tide-me-over and it seems to me that you’re a lot less likely to lose your wedge that way.”
    Spread of investment reduces risk. For p2p lending, the loan you make is spread over a number of borrowers & the loan received over a number of lenders. The p2p co’s turn is only around 1% & that covers debt recovery & insurance.
    I’d imagine a p2p payday-loan co works the same
    Not having to stiff someone on their doorstep must be worth 1%

  6. I’ve been using the Transferwise, peer-to-peer foreign exchange transfer service, of late. Saves me a fortune. And if you’re used to British banks, their efficiency is positively startling.

    Me too, and I quite agree: it’s superb!

  7. Oh bugger! I just spotted the flaw.
    It’s the tax.
    If you were lending into the payday loan market, you want a pretty high rate of return. But you’d get taxed on it. However, the borrowers can’t offset interest against tax.
    The big winners are going to be the Infernal Revenue, aren’t they?

  8. @TimN
    I’m curious. Have you had any problems with your bank? Last couple of weeks, I’ve spent 4 1/2 hours on the phone with mine. Transfers to Transferwise being blocked. Last one, they’d run me through a credit check agency. Why? I’ve been banking with them for 20 years. WTF do they think the credit agency gets their data from? Apart from them?

    I’ve a suspicion banks may be a playing a bloody-awkward tactic. Transferwise must be creaming them.

  9. You could make a passable return on Zopa a few years back, even taking into account that gave a poor deal from a tax perspective (no offsetting of fees or bad debts, no ability to use it inside a wrapper) but as it got more popular the rates fell (good. market forces etc) and the model was significantly dumbed down to the point of it being little more than a savings account.

    You used to be able to offer funds to specific borrowers and specific rates based on the borrowers’ pleadings. 10%+ was not unusual, and the default rate was acceptable. But they got rid of all of that.

    I liquidated what I could and wouldn’t go back. I now do P2P in Australia with Ratesetter, which, I think, is possibly owned by Zopa. The market is still pretty immature here, so the rates are better and the model is still sophisticated enough that you can manage your portfolio within parameters you find acceptable.

    As to P2P for payday loans.. as a lender I wouldn’t see the point. Payday loans are not about getting a return on money loaned out, they are about getting a return on money invested in IT and marketing. So I’d invest in a good platform on an equity basis, but as the differentiators in that market are the tech and the brand, not the rates, I don’t see any gain from a P2P model other than hoping that it would be painted as ‘ethical’ and win brownie points… But as Guardian readers don’t use payday loans, I’m not optimistic.

    Plus, I’d ask myself why someone who’s done the up-front work of developing the tech, and is fronting up the cash for the marketing, needs to come to me for the piffling matter of financing the loans themselves.

    One thing I have learned is that the real way to make money in P2P is to own the platform. Zopa did better out of me than I did out of Zopa.

    If I had a working model for P2P payday loans then I’d be hawking it around the credit unions and looking to take license fees. If they could get into that space (which they can’t as the stand because they simply cannot afford the investment required to compete on convenience, which is what the punter needs) then that might be a game changer. They would be perceived as being nicer even if they treated borrowers exactly the same as the likes of Wonga do (which, these days, is generally pretty well).

    So build your product, white-label it, and let someone else deal with the PR and the funding. I’d invest in that.

  10. On the tax: you will shortly get a tax-free allowance of £1,000pa for interest, so for modest sums it will be doable without HMRC getting a slice.

  11. Salamander

    Totally agree with the Everything the excellent ‘The Thought Gang’ said on Zopa – used to be a really good site when you could set rates individually but gradually went to a much more uniform (and no doubt administratively simple) approach which limited potential returns and when defaults were factored in probably didn’t yield more than 3 to 4% maximum. Still have a small amount in but haven’t added any new money for an age. Ratesetter is more like the Zopa of old so worth a punt…

  12. Invoice based lending is common enough these days, even payment based lending such as amazon and paypal do.
    Not come across short term p2p business lending but not usually looking for loans.

  13. How about one where idiots could post all sorts of personal data and trivia online in a race to have their identity stolen, their house bugled, and look like an idiot.

    Oh wait…

  14. Have you had any problems with your bank?

    Not on this specific issue, no. BNP are, on the whole, not bad. Credit Suisse were superb until about 6 months ago when they decided that instead of having a personal banker who I could email directly, they’d switch to a “dedicated” customer service team that I could contact only by phone during Swiss office hours. Now they’re just your usual, useless bank.

    But so far no issues with TransferWise. Wouldn’t surprise me if the banks are going to start kicking up a fuss about it though, must be costing them millions.

  15. I tried TransferWise once. It was really slow, the rate was no better than I would have got from my usual provider (World First), and they not only failed to give me the ‘fee free’ first transfer their promo promised, I never got a response when I pointed that fact out for them.

    So there you go, a little bit of contrast to the cheerleading from the rest of you.

    I wouldn’t go near a bank for a chunky transfer, but I’m not sure TransferWise has a much of a rate advantage over the forex specialists. And don’t see how it could if the (non-bank) market is competitive. This was all a couple of years ago, though, so things may have changed.

  16. I wouldn’t go near a bank for a chunky transfer, but I’m not sure TransferWise has a much of a rate advantage over the forex specialists.

    Their advantage for me was that they’d actually set me up with an account, rather than ask me to send umpteen pieces of paper to them “to prevent money laundering”.

  17. “Their advantage for me was that they’d actually set me up with an account, rather than ask me to send umpteen pieces of paper to them “to prevent money laundering”.

    TW did ask me for validation for the latest transfer 10k+
    Meant uploading bank statement scan. They OK’d it whilst I was on the phone, sorting the fallout from the bank bollox.
    All done in a slight US accent. Makes a change from incomprehensible Pakispeak & tickbox banking.

  18. Tim, if you really want it to be outrageous, host your P2P website in a tax haven. You’ll get lots of free publicity in the Guardian, BBC as well with a bit of luck.

  19. “I was looking at cheaper payday loans a while back… ”

    Nothing says you’ve made it like disclosing that you’re taking time to search out a cheaper source of payday loans.

    Thanks for making my day.

  20. “I was looking at cheaper payday loans a while back… ”

    Nothing says you’re fit to pronounce on corporate ethics, multinational corporate business taxation and economics in general like being unable to make through a week without help from your friendly neighborhood shylock.

    Thanks for making my day.

  21. “I tried TransferWise once. It was really slow,..This was all a couple of years ago, though,”

    P2P implementations often are at the beginning.
    Transferwise, don’t, generally, buy & sell currency. They match buyer with buyer. How it works. So, for any exchange, they need someone “the other way” to complete the exchange. The larger their customer base, the quicker they’ll find a match.
    I was discussing with them GPB> Peso Co. They’re unlikely to match me a Peso Co>GBP, instantly. You could sit around forever, awaiting the straight match in a sizable amount . But Peso>Euro should be easier. Lot of transactions between Co & the Colombian diaspora in Spain, for a start. (Why, I couldn’t possibly comment). So a GBP>Euro>Peso Co shouldn’t be problematic. How they’d do it. Once I’ve created a frenzy of Colombian/UK trade it won’t be a problem. D’y reckon I should ask Osborne for government assistance? I believe he might know something about the subject.
    When criticising P2P, it’s worth remembering it is P2P. You’re one of the P’s. So you’re really criticising yourself. It won’t work unless you use it.

  22. As outrageous ideas go, this pretty piffling. Outrageous business is setting up a worldwide network of annual races of high performance cars, where verious dictators and despots pay your organisation to give them worldwide television coverage, pay fantastic bribes to the bankers of your company to stay in the business well after your retirement date, and then go on TV to say that bribery is simply a tax that global sports have to pay.(whilst being headquartered in a tax haven).

  23. How about being paid to sit in a shed in Norfolk thinking big thoughts, deciding when the rules are wrong and getting them changed* and being unable to admit to a lack of knowledge/expertise in anything.

    *That’s a direct quote

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