Tijan and I have been working on a social credit card – putting together a business based upon the theory of social peer monitoring of credit as evidenced recently in micro-finance in the developing world. We plan to apply this model to the US consumer finance market (credit cards) to significantly reduce the APR to consumers by helping them reduce their strategic default rates through peer monitoring and management of their credit positions.
Shortly after Tijan and I completed our first draft of a business plan including market analysis, revenue model, and strategic analysis, Prosper launched. We were already familiar with Zopa in the UK which instituted a peer-to-peer lending system which provides significant value to borrowers but seems to destroy value for lenders (read it depends upon stupid lenders). Nevertheless an interesting concept. We also knew that Benchmark Capital, who funded Zopa, was preparing a US-version of the service. However we were unprepared for the addition of the group credit principle to the model. Basically, Prosper is Zopa, however lenders and borrowers can join groups which will vouch for and monitor one another. Portions of their website read as if they were lifted directly from our business plan.
Nevertheless, we are enthusiastic about the potential of our idea. Prosper has still missed the boat, replicating Zopa’s failure to generate value for the lenders. Our model will drive real revenues backed by deep markets while sharing the benefits obtained through group credit management with the consumer. And in our mind, the existence of Prosper only serves to validate our potential market segment and the concept of group credit management itself. (The Economist even published an article on the topic!)