Peer to Peer Banking
Encyclopedia
Peer-to-peer banking is an online
system that allows individual members to complete financial transaction
s with one another by using an auction
style process that lets members offer loan
s for a specific amount and at a specific rate. Buyers have the option to look for an amount and rate of interest that meets their needs.
All members are categorized by their risk
level. Members can browse for other people based on various demographic information.
Since P2P banking does not use third party banking institution intermediaries the rates and terms are often much more favourable for the members.
Unlike conventional banking where the spread between deposit rates and lending rates are consumed to finance the bank's administrative and logistic expenses, both lenders and borrowers get to save such costs, while paying certain commission to the P2P portal provider and/or the credit rating agency
.
P2P banking and financing has been proposed as a method to accelerate the development renewable energy
projects while more equitably distributing the return on investment
. These concepts have now been instituted by Energy in Common
and Kiva
in their green fund.
ONLINE
ONLINE is a magazine for information systems first published in 1977. The publisher Online, Inc. was founded the year before. In May 2002, Information Today, Inc. acquired the assets of Online Inc....
system that allows individual members to complete financial transaction
Database transaction
A transaction comprises a unit of work performed within a database management system against a database, and treated in a coherent and reliable way independent of other transactions...
s with one another by using an auction
Auction
An auction is a process of buying and selling goods or services by offering them up for bid, taking bids, and then selling the item to the highest bidder...
style process that lets members offer loan
Loan
A loan is a type of debt. Like all debt instruments, a loan entails the redistribution of financial assets over time, between the lender and the borrower....
s for a specific amount and at a specific rate. Buyers have the option to look for an amount and rate of interest that meets their needs.
All members are categorized by their risk
Risk
Risk is the potential that a chosen action or activity will lead to a loss . The notion implies that a choice having an influence on the outcome exists . Potential losses themselves may also be called "risks"...
level. Members can browse for other people based on various demographic information.
Since P2P banking does not use third party banking institution intermediaries the rates and terms are often much more favourable for the members.
Unlike conventional banking where the spread between deposit rates and lending rates are consumed to finance the bank's administrative and logistic expenses, both lenders and borrowers get to save such costs, while paying certain commission to the P2P portal provider and/or the credit rating agency
Credit rating agency
A Credit rating agency is a company that assigns credit ratings for issuers of certain types of debt obligations as well as the debt instruments themselves...
.
P2P banking and financing has been proposed as a method to accelerate the development renewable energy
Renewable energy
Renewable energy is energy which comes from natural resources such as sunlight, wind, rain, tides, and geothermal heat, which are renewable . About 16% of global final energy consumption comes from renewables, with 10% coming from traditional biomass, which is mainly used for heating, and 3.4% from...
projects while more equitably distributing the return on investment
Return on investment
Return on investment is one way of considering profits in relation to capital invested. Return on assets , return on net assets , return on capital and return on invested capital are similar measures with variations on how “investment” is defined.Marketing not only influences net profits but also...
. These concepts have now been instituted by Energy in Common
Energy in Common
Energy in Common is a not-for-profit organization, which is the first to enable microloans specifically and only for renewable energy technologies. EIC was founded by Hugh Whalan and Scott Tudman in 2009...
and Kiva
Kiva
A kiva is a room used by modern Puebloans for religious rituals, many of them associated with the kachina belief system. Among the modern Hopi and most other Pueblo peoples, kivas are square-walled and underground, and are used for spiritual ceremonies....
in their green fund.
Models of P2P Banking
The following two pictures show the difference between the peer to peer banking approach and the normal way with a financial institute.See also
- Person-to-person lendingPerson-to-person lendingPerson-to-person lending is a certain breed of financial transaction which occurs directly between individuals or "peers" without the intermediation of...
- Peer-to-peerPeer-to-peerPeer-to-peer computing or networking is a distributed application architecture that partitions tasks or workloads among peers. Peers are equally privileged, equipotent participants in the application...
- Peer-to-peer rentingPeer-to-peer rentingPeer-to-peer renting refers to the process of an individual renting an owned good, service, or property to another individual. It is also referred to as Person-to-Person rental, P2P renting, Collaborative Consumption, and Product Service System...
- Social peer-to-peer processes
- P2P-Banking.com, industry news