Though this creates risk for individual lenders who lend via peer-to-peer platforms, it also allows them to put some of their capital to use without researching stocks and funds or settling for meager interest payments from a savings account. Since the platforms themselves don’t have to worry about absorbing losses from failed loans, they can be much leaner than traditional banks. Moenninghoff and Alex Wieandt, business experts at the Otto Beisheim School of Business, peer-to-peer lending is driven by the “emergence of the Internet, ongoing innovation by startup companies, and increasing financial regulation of traditional banks.”īasically, technology makes it easier and safer for individuals who have money to find people who need money. Over time, this could compel banks to be more accommodating.Īccording to Sebastian C. What It Challenges: Traditional institution-to-individual lending is not an option for many would-be borrowers. With more liberal lending standards than most traditional banks, P2P lenders offer opportunities for a wider range of borrowers. Though the most common type of peer-to-peer loan is an unsecured personal loan, offered on such platforms as Prosper, equity crowdfunding platforms (more accurately described as peer-to-business) are quite common as well. However, the individual who lends the money bears the risk. Based on the borrower’s credit history, the interest rate is typically set by the platform, which acts as the intermediary between the two parties. What It Is: Peer-to-peer lending platforms allow individuals to lend and borrow money without going through a traditional bank. Here are some examples of what we mean when we talk about it. And, if you don’t yet, you probably will soon enough. In fact, whether you realize it or not, you probably already do. Virtually all forms of collaborative consumption use the Internet to connect providers with customers, whether they’re renting a house through Airbnb, sharing their car on Turo, or renting out your extra space through .Īnyone can participate in the sharing economy. It wouldn’t be possible without technology. In many circumstances, it allows participants to get by without owning valuable items, such as cars, while creating opportunities for others to extract value from idle possessions or talents. You can now get an unsecured personal loan directly from your peers, share the same office space with dozens of different companies, and stay at a stranger’s house instead of a hotel when you’re traveling out of town.īy making it easier to exchange resources on demand, the sharing economy increases efficiency. These exchange relationships often undercut traditional retail or employment arrangements, generally by reducing transactional friction or looping middlemen out altogether.

The network – we’ll call it the sharing economy, for simplicity – allows people to exchange tangible and intangible with one another at scale. These realms form the wireframe of a highly flexible economic network. It’s probably more accurate to break it into several related but distinct realms.

More important than what it’s called is what it is.Īs Fast Company contributor Rachael Botsman pointed out in a now-classic article on the topic, the sharing economy has long lacked a shared definition.

Others, the collaborative economy, or “collaborative consumption.” Still others, the sharing economy.

Shared venture definition