Monevator left a comment here that led me to his interesting reflections on experience as a Zopa lender - and speculations about what will happen in a crunch.
The biggest issue for me is Zopa has not yet been tested in anger. We haven’t yet seen how individual borrowers will behave in a peer-to-peer system if money really becomes tight. With some economists predicting a 1980s-style recession in every way except the shoulder pads, that’s a very real risk.I have a hunch, just a hunch, that peer-to-peer will turn out to be more robust in a crisis than institutuional lending - becuase I think if better cultivates a more primal human sort of trust than the purely mechanical efforts of banks. But we'll see, I guess!
Monevator also suggests it may be time for another Zopa podcast...
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Comments (3)
Johnnie
That's an interesting hunch. My own hunch is that assuming there are no barriers to quickly extracting money from Zopa, that lenders will act similarly in risky situations; they will pull in their horns and extract their money just to be safe.
Do you have any hard evidence to the contrary to support your hunch?
Graham Hill
Independent CRM Consutant
Interim CRM Manager
March 27, 2008 17:04 Permalink for comment
Hi Graham, hope you're well. I said hunch because I have no hard evidence at all. Just this sense that it's easier to remove money from an institution, an abstraction, than from what appears to be some kind of human life form!
March 27, 2008 18:25 Permalink for comment
Glad you checked out the article Johnnie, thanks for the link.
@Graham: Interesting. There are some barriers, in that if money is lent out, it can't be extracted until repaid (as I understand it).
I'd expect lenders to increase their participation provided Zopa can demonstrably keep its defaults down (defaults are currently less than even its predicted defaults in nearly all markets). That said, if I saw a huge spike up in borrowing requests at Zopa I might do as you say (where possible), as I'd worry about the quality of borrowers coming over deteriorating. A bit like the smaller building societies closing their doors at the moment.
March 29, 2008 11:38 Permalink for comment