The promise of Internet commerce has been easing matching, lowering search costs, and allowing new entrants access to larger markets by de-territorializing them. While there are Internet banks, this model of consumer borrowing is new and perhaps the beginning of a real revolution in finance.
“This week saw the latest twist on what’s come to be known as the ‘eBay model’ with the launch of Zopa [in the UK] – an online loans service that works in a similar way. Anyone with some spare cash can offer it up for a loan, through Zopa. Lenders set their own interest rates and can choose which borrowers to lend to, based on their credit rating.
Borrowers, meanwhile, can pick a rate that’s right for them and because Zopa is simply assisting the transaction, not lending its own assets, it claims to take a smaller cut (1% of the amount borrowed) than a bank. Safeguards are built in to help prevent lenders being fleeced and the whole outfit is sanctioned by the FSA – Britain’s financial services watchdog.”