On Monday (17.11.2014) the European version of the peer-to-peer lending conference LendIt took take place in London. LendIt is a young conference, it took place one and a half years ago in New York City for the first time. Yet the conference is very successful and covers the latest trends and important developments of the online lending space.
Peer-to-peer lending has been a new phenomenon until a few years ago. But the space has grown into a mature industry. The biggest player alone, which is Lending Club from the US, currently facilitates loans worth more than 1 billion US dollars every quarter.
Today bitcoin based peer-to-peer lending is new to the scene. We want to take this opportunity to highlight why and how bitcoin peer-to-peer lending is different from the now traditional p2p lenders which are based on government issued currencies.
Some of the content of this blog post came up in the panel on “Next Generation P2P Lending Models”. You can see the video from this seminar here.
So let’s get started. Let’s have a look at the 3 main factors that differentiate Bitbond from traditional P2P lenders.
Nearly all peer-to-peer lending platforms operate in just one market. Lending Club for instance covers only the US market. German auxmoney is only available in Germany. There are a few exceptions like Bondora from Estonia which is available in a number of European countries.
But other than that there aren’t many platforms that enable cross-border lending. Therefore cross-border lending is a unique feature of Bitbond. Cross-border lending has many advantages. Lenders can diversify their portfolio better by investing in different world regions. Borrowers from smaller countries have a better probability to get funded.
More advantages of cross-border lending can be found in this blog post on the 6 reasons bitcoin loans are the way of the future.
2. Low cost infrastructure
Every traditional peer-to-peer lending platform needs to cooperate with a bank. Actually the goal of p2p lending is to cut out the middleman, but this is not really possible based on traditional payment and money transfer networks.
It wouldn’t be feasible for a new platform to build the infrastructure that’s necessary to conduct all the payment transactions of loan disbursements and monthly annuity payments. Therefore a bank usually does this for the platform.
This is not directly visible to the users of these platforms. But it is visible indirectly. The banks which conduct payment transactions naturally do this for a fee. These fees are a major cost to the p2p lending platforms and ultimately are borne by the users through their fees.
Bitbond does not need to cooperate with a bank to conduct payments. We run on the open source bitcoin software which causes only negligible server costs. We pass this cost advantage on to our users and therefore have lower fees than traditional peer-to-peer lending platforms.
3. User bank independence
As stated above Bitbond is independent from bank infrastructure. This also means, that the users don’t need a bank account. Therefore the third major difference between traditional p2p lenders and Bitbond is that with Bitbond users only need an internet connection to get access to a global loan market. In the years to come as smart-phones become more widespread this might be the most crucial differentiation.