Complete Lending Disruption

It’s only a matter of time before the lending business is completely disrupted by the crowd. I’ve watched over the last decade as microfinance loans in developing nations have turned into domestic peer to peer lending of all shapes and sizes. Until now I feel as if it was a hobby for people, something they felt good about, I’ve even done it a few times with small amounts of money.

But a real and major disruption is about to take place which will completely change the landscape of lending across this nation, and the world. Lending, is about to be taken out of the hands of the banks, and put into the hands of the average person.

Why? For three reasons.

One, we’ve reached the point where enough of this country, and the world, is connected through the internet, and our social platforms have become sophisticated enough to support peer to peer lending on a massive scale.

Two, the low interest rate environment around the world is frustrating savers who do not want to participate in equity markets, but are getting nothing by giving their money to the banks. They are getting less than nothing by buying treasuries.

And three, the banks refuse to lend. They are in such poor shape, taking huge risks on sovereign and other types of debt, that lending to the average person, a boring low margin business that Harvard MBAs want to piece of, has pretty much been jettisoned.

Lending, both personal and corporate, is about to be completely disrupted by the crowd over the next decade. Not only lending, but venture capital at the earlier stages through equity based crowd funding, as well as artistic funding such as putting up money for a big motion picture, yes that will happen, the first crowd funded blockbuster movie, coming to theaters soon.

As is the case in other industries, the financial system we have today will not be fixed via legislation. Why? Because they give our politicians too much money. It will be fixed through innovation and finding ways around those institutions, until they are irrelevant, which they will be soon.

You will get a mortgage from a peer to peer mortgage lending platform, you will get a small business loan from a peer to peer lending platform, you will fund your startup on a crowdfunding platform, and you will finance the production of your new widgets on a crowd funding platform, selling merchandise before you’ve even created it.

It’s funny, much like our parents, my generation has such a disdain for the “system” we were placed in to. Except this time it’s not a government system we’re fighting against, it is a corporate system of too big to fail banks (all dying), advertising everywhere we look (hard to advertise on mobile), and failed educational institutions (have you seen the chart of Strayer?). These institutions are all dying, not through waiting for our government to do something, but through saying fuck you to the current paradigm and writing a new one by innovating.

I’m proud of my generation, we may be disruption hippies as Josh Brown says, but I’m proud of that.

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