This industry is unusual. There has never been a consensus on what to call it. There are four terms that I see used all the time: peer to peer lending, p2p lending, person to person lending and social lending. I have also seen PtP lending and many people confuse it with micro finance and crowd sourcing.
If you look closely at the home pages of Prosper and Lending Club you will notice that there is no mention of any of these terms. Prosper still uses peer to peer lending but not on their home page or their main investment page. On Lending Club you will be hard pressed to find any mention of peer to peer lending (or any of the other terms) at all. It is only in their help section and in old press releases that you will find these terms.
Why? Because none of these terms really describe what these companies do anymore. While the majority (for now) of transactions conducted on these sites are between individuals, on the investment side, as I wrote about earlier this week, the individual is becoming less important. A hedge fund that invests in a loan can hardly be considered a peer to peer transaction.
What Shall We Call This Industry?
This industry is still young enough that if both Prosper and Lending Club supported a new name it would probably stick. But what term should we use?
Lending Club is focusing on the term “Prime Consumer Notes” now on their investing page. But that only describes one side of the transaction. A borrower will certainly not consider their loan a “prime consumer note”. We need something that encompasses both sides of the equations.
Here are a few suggestions I have come up with:
- Crowd Lending or crowdlending
- Direct consumer lending
- Direct lending
What do you think? Do we need a new name here or is peer to peer lending just fine? I would love to hear your suggestions in the comments.