One could argue that we are living in a period of renaissance when it comes to developing new financial technologies. Those new financial technologies, colloquially known as Fintech, include such radical ideas as Bitcoin and block chain technology, as well as more mainstream concepts that involve payments and lending. The fact is, these new technologies are changing the financial landscape . Fintech’s main benefit is essentially a better deal for all parties, whether that means lower fees or higher rates for savers or lower rates for borrowers. There is another key benefit in new Fintech technology which tends to get significantly less exposure. Of course, I’m talking about the P2P lending model , which is Fintech that has enabled savers and lenders to come together. As with every new business model, especially when it comes to finance, there is tremendous interest but also a stark warning of the risks it poses for those who invest their savings. Yet, paradoxically, the P2P lending banking model may actually have the power to prevent the next financial crisis. Traditional Banks Vs P2P More than seven years have passed since the 2008 US sub-prime crisis , and the global banking system is still trying to recover. Yet, with US housing prices once again on the rise and with mortgage rates close to record lows, another credit bubble could be in the making , and this time, not just in the US. So far, efforts to prevent another crisis have focused putting in place tougher regulations. But there is one major flaw in the current banking system that has not been properly addressed but is, in fact, very well addressed by P2P lending. Under the current system, bankers do not risk their own money; rather, the risk is entirely on their savers aka the […]
