[sanderjd]

That's the point the parent is making. If the risk profile is as you say, that isn't a profitable segment for the banks. The question being asked is: why would the risk profile be any different for peer to peer lenders than it is for the banks? If it isn't profitable for the banks, and the risk profile isn't different for the peer to peer lenders, then it won't be profitable for them either.

[Viliam1234]

The profit made by the bank needs to also cover the cost of employees, bureaucracy, huge buildings, etc. For a peer-to-peer lender, even tiny profit is enough.

As an example, imagine that you lend someone $100, and there is a 50% chance they will pay you back, and in that case they will pay you $210. And all this costs you is a mouse click. Some individual would click "yes". In their free time.

Now in the bank, there is an employee doing this as a part of their paid job. They have a manager, that manager also has a manager, plus you need to pay the janitor, etc. You also need to pay diversity training for all of them. And all financial transactions they do must follow all kinds of regulations, which regularly change. Simply, the overhead is not worth it.

[ksec]

$100 > $210 is an ridiculously high interest rate. In a world today where borrowing cost for a lot of people are ~10% APR.

But I do see mobile payment and mobile borrowing could be mounted together.

[xivzgrev]

See points above. Banks, being an integral part of the financial system, are only allowed to take on so much risk. Third party companies have no such restrictions. But they can’t issue loans because they are not a bank. So what happens is a bank issues a loan according to criteria the bank and the third party agree to. Then the bank sells it the next day to the third party. That way the bank is more insulated from risk because they aren’t holding the loan.

[bboreham]

> they can’t issue loans because they are not a bank

I have to think there is some misunderstanding here - lots of nonbank companies issue loans. Ford Motor Credit is not a bank.

The thing that banks are uniquely allowed to do is to take deposits, and lend out that money.