Do We Need a New Name for Peer to Peer Lending?

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.

Peter Renton is the chairman and co-founder of LendIt Fintech, the world’s first and largest digital media and events company focused on fintech.

LendIt Fintech conducts three conferences a year for the leading fintech markets of the USA, Europe, and Latin America. LendIt also provides cutting-edge content all year long via audio, video, and written channels.

Peter has been writing about fintech since 2010 and he is the author and creator of the Fintech One-on-One Podcast, the first and longest-running fintech interview series.

Peter has been interviewed by the Wall Street Journal, Bloomberg, The New York Times, CNBC, CNN, Fortune, NPR, Fox Business News, the Financial Times, and dozens of other publications.

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Ian
Ian
Jun. 24, 2011 1:48 pm

I’m a fan of Direct Consumer Lending (DCL); as you state, it encompasses both sides of the ‘transaction’ and doesn’t have the stigma associated with it that ‘peer-to-peer’ does after the Napster / File sharing fiasco of the late 90s.

Wiseclerk
Jun. 24, 2011 2:51 pm

True, there are many names and none fit without causing confusion. I never liked ‘social lending’, unless it would be only applied to Kiva and other microlending services. What’s ‘social’ about lending on Prosper or Zopa? Most lenders do it to make a profit.
Crowd lending focuses on the lender side only, equally mispoint as saying crowd borrowing.
Direct consumer lending and direct lending lack the originality to offer disctinction and recognition.

There are several business-models that could be seen as subcategories, e.g.
p2p microfinance
p2p student loans
p2c lending (peer-to-company lending) – is there another, better term for this?
p2p equity / startup financing

I named by blog P2P-Banking and feel that this name that was off-target in the beginning of p2p lending becomes a better fit, able to embrace the ever-evolving new trends and services. The only downside is that it contains the word “banking” and thereby causes association with banks, which most services wanted to overcome and leave behind serving their customers better with new monetary processes.

Ronald Kleverlaan
Ronald Kleverlaan
Jun. 25, 2011 1:54 am

I prefer crowdbanking or crowdlending.

This makes it easier to compare to other crowdfunding initiatives:
1) Crowdsupporting – donating without reward
2) Crowdfunding – Investing in high-risk initiatives
3) Crowdbanking – lending with interest

Bilgefisher
Jun. 27, 2011 11:06 am

I think a simple “Multi-source lending” would work. That’s exactly what is happening. It also tells outsiders what it is. I have a multi-source loan or I am multi-source lender.

Jason

Matt Jabs
Jul. 11, 2011 1:17 pm

I like Direct Lending.

Simon Dixon
Jul. 19, 2011 5:52 am

Funnily enough I just encountered this problem.

I am currently writing a book on banking reform with a few chapters on person to person lending and found myself spending several paragraphs defining names and distinguishing between services.

I dont think many people get peer to peer lending and all the derivations.

Just got back from doing interviews at the institute for social banking summer school and they have a whole new definition of social lending referring to the social impact side.

To me social means Facebook, but it also means micro-finance when you say it slightly differently.

Everybody thinks differently, so what the hell is it?

I watch interestingly at your suggestions.

Simon Dixon