This isn’t a prediction but if a recession ends up hitting the US then the profitability of most p2p portfolios won’t be very good which would really slow the growth of the industry. That said the mutual fund industry had some terrible times in the 70′s and 80′s when equity growth was awful and it eventually became a pretty big industry anyways.

Ernesto – hilarious comment.

Mike

1. Blog readers the world over drop dead from boredom after reading the millionth time how they can get $25/$50/$100 just for signing up.

2. Participants realize lending money for profit is a job best left to professionals with deep pockets and not part time amateurs.

3. People en mass come to the conclusion P2P is a flee-bitten dog that should be kicked to death. Shortly afterwards they jump on the latest and greatest Internet fad and blog that to death.

See you in five years.

I didn’t know that there is a 20% chance that debtors will default.

I think that in five years the sites Prosper, Lending Club, and Virgin Money will still be around, but they won’t be as big as the current hyped future numbers that some analysts are mentioning. The sites not backed by a single billionaire will have to stay lean to stay in business since they seem to be making rather thin margins on loans despite taking no risk. For example, Prosper is not even charging an origination fee on AA loans any more.

Not to harp on a single throwaway point in this post, but buying groceries online is a very good way to save some money and time. Living in NYC, nearly everyone I know does almost all their weekly food shopping via FreshDirect.com (other than fresh vegetables, which can be gotten cheaper and fresher from a local store). Their prices are usually equivalent to, and many times better than, any local grocery store in NYC including many slae prices and coupons. I know, because I actually price compared for a month before signing up for my FreshDirect account. Plus, they deliver to your door and no tips are expected or asked for no matter how large or small the order.

Before FreshDirect, grocery chopping in NYC was a MAJOR hassle, especially since no one we know owns, or ever wants to own, a car because the only thing more expensive than housing in NYC is parking a car!

Currently, I think P2P is great for the loan administrators such as Prosper. They make a fee, and put no money at risk. However, I think the risk is high for lenders, especially if default rates increase during this recession. Thus, I predict P2P lending will be smaller vs. bigger in 5 years.

Thanks for you follow up comment. I do think that certain loans could be outsourced to P2P lenders from the “brick and mortars” financial institutions , which would bring huge cost savings(and a ton of $$) to everyone involved in the process.

If I were to write about the most dominant thing in my financial life, it would likely be our (or, more appropriately, my wife’s) affiliation with the military. Expect a few articles of this nature in the future, though it will again be a niche-type post. I imagine that many people will pass over them as not applicable to them.

1) bought by major banks
2) threatened by other P2P sites that might emerge with strong backing from financial institutions

I would like to see a P2P lending site maybe for mortgages. I don’t recall a loan on either prosper or lending club for more than $25k..