Oct 16 2015

Peer-to-Peer Lending and the Future of Cooperation


The peer-to-peer lending market has major disruptive potential within financial services. Developing a strategy to embrace, adapt to, or defend against peer-to-peer lending will be a necessary step for all credit unions within the next five years.

Sean Geobey
Sean Geobey
Assistant Professor of Social Entrepreneurship and Social Innovation in the University of Waterloo’s School of Environment, Enterprise and Development (SEED)
Report Number 377

Executive Summary

An entrepreneur born in 1990 has grown up in quite a different world than one born in 1960. Imagine a person born in 1960 opening a restaurant in 1985. She would have relied on traditional outlets such as banks, credit unions, and investors for business capital—unless the venture was self-funded. Many industries in 2015 would be mostly unrecognizable to an observer from 1985, from retail to entertainment to travel. The funding industry is no exception.

Today’s 25-year-old entrepreneur is living in a new era of lending where traditional institutions are competing with new alternatives. Instead of going to a bank or credit union for business capital, the 25-year-old entrepreneur can turn to online-enabled crowdfunding platforms. These platforms allow large numbers of people, often strangers, to pool their financial resources to achieve common goals and finance everything from new consumer products to feature-length films, charitable causes, and, most recently, consumer loans. There are thousands of crowdfunding platforms, each using a unique business model and financing strategy and targeting a different and increasingly specific niche.

To the 25-year-old born in 1960 this approach would seem completely alien. However, a 25-year-old credit union pioneer born in 1890 would find the mutual aid principles and peer support underpinning the crowdfunding concept astonishingly familiar.