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Finance concept. Dollars and bank building.

[Editor’s note: This is a guest post from Jonathan McMillan, who has published the book The End of Banking: Money, Credit and the Digital Revolution. The book explains why a financial system without banking is both possible and desirable in the digital age. The article is part of a two-part series. The first article explained why marketplace lending is disadvantaged in the current regulatory framework. The opinions expressed in this article are the author’s own.]

To ensure their survival in the long run, marketplace lenders have to tackle the privileges of banking institutions – such as government guarantees and the access to Federal Reserve liquidity. We made this point in a previous article. But what specific changes should the industry propagate to create a sustainable and fair regulatory environment for the financial system?

The Obvious Option: End the Unfair Advantage

The most obvious solution is to simply ban government guarantees and prohibit the Federal Reserve to provide emergency liquidity. Prominent libertarian politicians advocate this solution. Should the marketplace lending industry befriend the Tea-Party movement, demand to end the Fed, and pledge to throw the head of Treasury into jail if he bails out another banking institution?

In some cases, such as this one, the obvious solution is not the right one. The current financial system is vulnerable to unpredictable chain reactions. Just think about the repercussions of the bankruptcy of Lehman Brothers. Could you stick to a pledge not to bail out financial institutions if it means that the whole system goes bust, implying millions of people to lose their jobs and homes?

The government can only remove the unfair advantages for incumbent banking institutions if the financial system is immunized against these destructive chain reactions. Even the former chairman of the Fed, and the current chairwoman from the International Monetary Fund acknowledge that the too-big-to-fail problem has not been solved – despite many new banking regulations. We have to take another angle on enabling a modern and stable financial system.

The Intuitive Option: End Banks

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Marketplace Lending News Roundup – March 28, 2015

by Peter Renton on March 28, 2015

During the week I share the latest marketplace lending news on Twitter as it happens. Then every Saturday I take the most interesting news items and blog posts from the past week and share them here.

Besting Hobson at LendIt USA from LinkedIn – James Alexander gives his thoughts on platform diversification and the upcoming LendIt USA conference.

No Traditional Financial Institutions? No Problem from TechCrunch – Interesting piece by Charles Moldow in TechCrunch on financial services innovation.

Peer-to-peer lender DirectMoney set to list on ASX from The Australian Business Review – DirectMoney has only been operating for five months, but they are about to go public down under.

Peer-to-Peer in the OR from Bloomberg – Is healthcare lending the next frontier for marketplace lending?

Impact of Whole Loan Funding on Prosper from Orchard – Analysis of time to fund for both whole & fractional loans on Prosper.

Analysing P2P Industry Returns – What are the Correct Comparables? And a note on Volatility… from AltFi – Great article about the AltFi LARI index comparing to other investments.

Peer-to-peer lenders can’t find enough borrowers from Quartz – The perennial challenge for p2p lenders as they scale is finding enough borrowers. [click to continue…]

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Lufax: the World’s Fastest Growing P2P Firm.  A Case Study on How a Major Financial Institution Can Build a Fully Integrated P2P Firm

March 27, 2015

A couple of weeks from now Greg Gibb, the Chairman of Lufax, will be taking the main stage at LendIt to introduce his firm to the online lending world and show everyone what it looks like when a major financial institution decides to organically build a P2P firm. In less than three years, Lufax is […]

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Podcast 33: Brock Blake of Lendio on Small Business Lending

March 24, 2015

There are many different loan choices out there today for small business owners. There are short term loans, merchant cash advances, asset-backed loans, equipment finance loans, SBA loans and many others. To help entrepreneurs sort through this myriad of loan choices and make the right financing decision is Lendio’s mission. Brock Blake is the CEO […]

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Marketplace Lending News Roundup – March 21, 2015

March 21, 2015

During the week I share the latest marketplace lending news on Twitter as it happens. Then every Saturday I take the most interesting news items and blog posts from the past week and share them here. Prosper Marketplace Selects Utah for Sales Headquarters from UtahPolicy.com – The Prosper team is expanding to a new state, Utah, setting […]

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Benefits of Investing in P2P Lending With an IRA

March 19, 2015

Taking advantage of tax deferred earnings is extremely important in building wealth for retirement. The tax savings over the course of a career can become substantial. When it comes to p2p lending, there are a few aspects that make having your p2p lending allocation in an IRA especially appealing. Lend Academy readers who follow Peter’s returns are well […]

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Branding, not Just Direct Response, Will Drive Future Marketplace Lending Success

March 16, 2015

[Editor’s note: This is a guest post by R. Tyler Smith and Mark Lusky. See the end of the post for their bylines. The views expressed here are their own.] While marketplace lenders use advanced technologies to determine applicant suitability and administer loans, most continue to use traditional direct response marketing to get borrower prospects, […]

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Marketplace Lending News Roundup – March 14, 2015

March 14, 2015

During the week I share the latest marketplace lending news on Twitter as it happens. Then every Saturday I take the most interesting news items and blog posts from the past week and share them here. The big news this week was Zopa in the UK celebrating their 10-year anniversary. They were the very first p2p lending […]

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Vouch Bringing Social Lending to the Borrower Experience

March 13, 2015

The initial promise of P2P lending when Prosper launched back in 2006 was that it would be a more social way to lend money. We would borrow money from a group of people we are connected with and pay back this loan more diligently because of that connection. Unfortunately, the reality was different than the […]

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StreetShares Secures $200M For Veteran-owned Small Businesses

March 12, 2015

StreetShares, a peer to peer lending marketplace focused on small business loans announced yesterday huge commitments from several investment companies including Direct Lending Investments, Community Investment Management and Eagle Bank Corp. The commitments total more than $200 million of funding for small business loans on the StreetShares marketplace. StreetShares was formed in 2014 by Mark […]

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