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Chris Larsen, Prosper.com CEO, on the rapid growth of his business, and how peer-to-peer lending came to be so popular.
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This is seeing a tremendous amount of growth it's -- peer to peer lending what is that well the idea is to allow individual investors to essentially be a banker to individuals who need loans.
The market is growing so much so that our guests company has seen.
A 370%.
Growth in volume over just the last year Chris Larson the CEO of prosper dot com we'll.
Largest peer to peer lending marketplace.
We found this fascinating Chris because it's almost like the free market at work banks wouldn't -- so how did this come about.
Oversaw thanks for having us you -- peer to peer lending is really a new form of banking enabled by technology and we've been delivering.
You know investor returns of about ten point 7%.
By opening up this new marketplace to allow people to directly.
Invest in credit worthy borrowers in an open open market so.
You know it's a yield starved world it's a credit starved world this is we think is a good solution using -- new things new technologies we didn't have been five years ago.
Well it is a tough world and any imagine that there there may be some to falters there what what is the payback rate what -- is -- default rate.
It's a reading about up five point 2% on prosper which is in line with what you see -- the -- the other major six -- they control most of the consumer market.
That's pretty good that's a pretty good -- at a better rate than you thought.
But you know -- that this now six years so done about 45000 loans about 260 million dollars has been let.
And you know we have a just an awesome tree -- a team in our risk management.
We have some of -- some of the best folks in consumer credit -- -- Nigel Morris co-founder of capital on for example.
So we think we've built a good really good risk model.
And that I think is now paying off and people are seeing those great returns and they that's -- we're seeing growth.
We've seen the comparison to almost like an eBay for banks where where do you have just one person with a product money and another with the need to.
They need a loan but.
To tell us about who your peers on the loan side are who who are these people people who just have piles of cash and want to lend it out maybe make a good percentage.
Yeah I think which we you know we we enable somebody -- as little as 25 dollars.
To invest on prosper.
Or it can be somebody with millions of dollars and we have those types of lenders as well.
So yeah we're about 80%.
Retail investors -- the average person average portfolio size of about 4000 dollars.
With about a hundred loans that they've made in -- small amounts and then we also -- are increasingly seeing large institutions.
Who are discovering.
Really the same as fixed income investments that they're making and we're seeing a lot more of those funds now participate on the platform so there's room for both.
So crystal when you become a bank I mean this is pretty kind of a close right out of being.
A bank in which case you have to have an awful lot of lot more forms and deal with more more regulators -- -- Well we are highly regulated or regulated by the SEC and by that the banking regulators are -- think the key difference here which we think it's pretty compelling.
You know we don't have to have FDIC insurance.
People are taking the interest spread who invest they're taking the risk.
-- that means we don't have that systemic risk that a traditional banquets I think it has good societal benefits as well.
As the change.
Been made at least when people first -- they basically needed cash is it something else that they're coming to you for now.
Get -- marketplace has changed since we started six years ago what we're seeing is.
So I -- very creditworthy borrowers are average ficus quorum of those borrowers is for new borrowers is about 720.
So it's a prime based customer base we're also seeing now a shift in many people using prosper to reap -- credit card debt.
We think that's actually a really good use case I think we're seeing Americans.
Strengthening their balance sheets they're trying to get out of credit card that was -- paid out and prosper loans paid down 13 or five years and that is turn out to be our safest credit categories so we we like the debt consolidation type of a -- what we like the idea Chris Larsen congratulations to you been up and running for a while now sounds like a proven story thank you thanks Chris thanks so much.
