Seattle PI does a nice summary of the workings of prosper.com.

Web site offers real personal loans

Prosper brings together lenders and borrowers. Lenders can make loans as small as $50, togain deiversification, while borrowers get what they need. The interest rates are attractive, and the piece makes the point that many view Propser as part of their investment portfolio diversification.

Payment News point out that recently Online Banking Report predicted this market could reach $1Bn within 5 years. At that level the impact on tradtional banks is small in the near term. But I wonder if that assessment is conservative. When we consider what eBay and Amazon have accomplished over a similar timeframe, that assessment may be in the low side. And the Prosper/ Zopa model has simlar attributes using netowrk based trust to bring together parties with convergent interests.

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