Prosper.com has used user contribution to deconstruct the traditional banking business model. Propser is a website where individuals can lend and request to borrow money.
Description of user contribution system
Borrowers set the maximum interest rate they wish to pay (on loans of up to $25,000) and lenders bid on specific loans by committing a portion of the principal and setting their minimum interest rate. Prosper operates as a reverse Dutch auction, matching bids with the lowest interest rates in order to fund the loan.
Prosper verifies selected borrowers' identity and personal data before funding loans and manages loan repayment and reduces risk by verifying personal data.
Benefits for the users
Lenders can earn a higher interest rate than they would with other types of investments. Prosper eases lending by managing loan repayment and reduces.
Borrowers can take out loans for lower rates than they might receive at a financial institution. Bidding structure ensures they get the lowest rate lenders are willing to offer.
Benefits for the creators of the system
Prosper makes money on its transaction-based revenue model. It collects a one-time fee on funded loans from borrowers (1-3%, depending on borrowers credit score). Lenders pay a 1% annual servicing fee. Since its inception, Prosper has facilitated $137M of loans (22,000 loans).
History of the idea
What do you know about this UCS? Who started it? When did it start? Include what (if anything) you know about how it came to be. Feel free to link to articles about it if you are aware of any, or upload documents that you have permission to share.
Scale
As of April 2008, Prosper has 670,000 users (triple the prior year, possibly driven by banks tightening lending criteria). Over 22,000 loans have originated through Prosper, for a total value of $137M.
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