Peer-to-peer banking is a term used in the
blockchain
A blockchain is a type of distributed ledger technology (DLT) that consists of growing lists of records, called ''blocks'', that are securely linked together using cryptography. Each block contains a cryptographic hash of the previous block, ...
banking industry and designates an act of transfer of value without the need of an intermediary such as a bank.
Peer-to-peer banking is an
online
In computer technology and telecommunications, online indicates a state of connectivity and offline indicates a disconnected state. In modern terminology, this usually refers to an Internet connection, but (especially when expressed "on line" ...
system that allows individual members to complete financial
transactions with one another by using an
auction
An auction is usually a process of buying and selling goods or services by offering them up for bids, taking bids, and then selling the item to the highest bidder or buying the item from the lowest bidder. Some exceptions to this definition e ...
style process that lets members offer
loan
In finance, a loan is the lending of money by one or more individuals, organizations, or other entities to other individuals, organizations, etc. The recipient (i.e., the borrower) incurs a debt and is usually liable to pay interest on that ...
s for a specific amount and at a specific rate.
Definition in the traditional banking
Buyers have the option to look for an amount and rate of interest that meets their needs. All members are categorized by their
risk
In simple terms, risk is the possibility of something bad happening. Risk involves uncertainty about the effects/implications of an activity with respect to something that humans value (such as health, well-being, wealth, property or the environm ...
level. Members can browse for other people based on various
demographic
Demography () is the statistical study of populations, especially human beings.
Demographic analysis examines and measures the dimensions and dynamics of populations; it can cover whole societies or groups defined by criteria such as ed ...
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
Renewable energy is energy that is collected from renewable resources that are naturally replenished on a human timescale. It includes sources such as sunlight, wind, the movement of water, and geothermal heat. Although most renewable energy ...
projects while more equitably distributing the
return on investment
Return on investment (ROI) or return on costs (ROC) is a ratio between net income (over a period) and investment (costs resulting from an investment of some resources at a point in time). A high ROI means the investment's gains compare favourably ...
.
[ K. Branker, E. Shackles, J. M. Pearce, �]
Peer-to-Peer Financing Mechanisms to Accelerate Renewable Energy Deployment
�� ''The Journal of Sustainable Finance & Investment'' 1(2), pp. 138-155 (2011). These concepts have now been instituted by
Energy in Common
Energy in Common (EIC) was a not-for-profit organization issuing microloans specifically and only for renewable energy technologies. EIC was founded by Hugh Whalan and Scott Tudman in 2009 (website launch 2010). It has the very ambitious goal of d ...
and
Kiva
A kiva is a space used by Puebloans for rites and political meetings, many of them associated with the kachina belief system. Among the modern Hopi and most other Pueblo peoples, "kiva" means a large room that is circular and underground ...
in their green fund.
Old models
The following two pictures show the difference between the peer to peer banking approach and the normal way with a financial institute.
File:Traditional_banking_model_simplified.png, Traditional banking model (simplified)
File:Peer_to_peer_banking_simplified.png, Peer to peer banking model (simplified)
See also
*
LendingClub
LendingClub is a financial services company headquartered in San Francisco, California. It was the first peer-to-peer lender to register its offerings as securities with the Securities and Exchange Commission (SEC), and to offer loan trading on ...
*
Peer-to-peer
Peer-to-peer (P2P) computing or networking is a distributed application architecture that partitions tasks or workloads between peers. Peers are equally privileged, equipotent participants in the network. They are said to form a peer-to-peer ...
*
Social peer-to-peer processes
Social peer-to-peer processes are interactions with a peer-to-peer dynamic. These peers can be humans or computers. Peer-to-peer (P2P) is a term that originated from the popular concept of the P2P distributed computer application architecture which ...
*
Peer-to-peer lending
Peer-to-peer lending, also abbreviated as P2P lending, is the practice of lending money to individuals or businesses through online services that match lenders with borrowers. Peer-to-peer lending companies often offer their services online, and ...
References
{{DEFAULTSORT:Peer-To-Peer Banking
Banking
Peer-to-peer