p2p finance

Here is our Mercury News story today (free registration) about Prosper, the online loan marketplace that seems almost too good to be true.

People can borrow money at lower rates than they can at the bank. And lenders can get higher rates than they can get elsewhere too. It works because it cuts out the middlemen, or the banks that have until now claimed a big percentage cut of the loan.

To write a check to any person costs me nothing. (Well, I have to pay for the checks, but that itself can not be circumvented; checks are a tangible and those always cost money.) To go to the bank, take money out and give it to someone costs me nothing. But to send someone money directly from my bank to theirs costs money. The de facto standard for sending money between parties has been PayPal. However, since a de facto standard is almost always a de facto monopoly, they really haven't had much incentive to lower rates. What kills me is that banks already have the infrastructure to handle this sort of thing, yet are totally unaware of it. And since they would cut out the middle man (in this case, PayPal) they could have slightly better rates and still make a profit.

Whatever, they're clueless and won't catch on for at least another decade.

But as of late, other payment processors have started to set up shop (though amid rumors of scandal and scam). While I'm not giving either of them anything beyond basic contact information, I'd like to see how they pan out. Competition is always a good thing for the consumer. If you would like to try them out, let me refer you so maybe I get some money out of it. So far I've signed up for:

• AlertPay
• GreenZap

Christina told me about GreeZap a while ago and I just signed up for AlertPay now.

I wouldn't give them anything beyond basic contact information yet. I'd wait until some trust sets in. I'd also use a password different from what you normally use. I generate a 15 character password for every account I sign up for, however, I know a lot of people use the same password over and over again. If either of these new paymeny processors aren't legit, they will then have your email address and password that you use for PayPal and proceed to empty your bank account.

I'd like to note that GreenZap Scam has a link to AlertPay with a referral ID of 2.