Analytics on Lending Club social lending by Dataspora

There is a fantastic analysis using the Lending Club datastore to investigate and visualize the marketplace Lending Club blogged over at Dataspora.  As I've mentioned before, I'm intrigued with P2P finance as an emerging industry, and if we're lucky, as an alternative asset class.  As an emerging industry, we're seeing a number of different competitors rapidly enter and exit the industry, and regulations that fit it like a hand-me-down sweater, a little too big, clearly made for the problems of a different industry: the financial older brother they most resemble, but are distinct from. As an alternative asset, they're even more interesting.  If it is the case that P2P loans do behave differently than a benchmark composed of securitized loans, there may be an opportunity someday.  However, the lemons-problem in this market is undeniable: it's believed that most entrants into this market are those who simply cannot obtain traditional loans, and perhaps with good reason. Observe the default rate for California at about 30%, and quickly you realize you might need to be charging micro-usury rates to make viable micro-loans (if, hopefully, you don't have the assurance of Micro-Sal breaking micro-kneecaps!). The potential of the industry though is exactly that people will lend to people when banks will not.  If there's another credit or liquidity crisis, this is an industry that could be poised to step in. If it behaves systematically differently in times of crisis or limited liquidity, it could theoretically provide useful diversification benefits.  On the other hand, though, it's quite likely that consumers will be more likely to default at such times, so it's unclear on how the total market will shake out---I don't believe there is enough data to understand these markets responsibly yet. To start analyzing it for yourself, read Tanya Cashorali's article, fire up R and ggplot, and try it yourself!

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