The traditional banking model
Banks act as an intermediary between savers and borrowers. They pay interest on deposits and lend money to consumers and businesses. Banks generate income by "taking a spread" between the interest they charge on loans and that paid on savings. Given the size of their business, the fact they need to take risk on balance sheet and the infrastructure they have they take large spreads and treat many borrowers as a group rather than individual risk pricing.
vs.
the Peer Estate/Marketplace lending model
Peer Estate matches lenders with borrowers via our online platform. By allowing investors to choose their loan, we can risk price each loan and, therefore, judge each individual borrower and property on its own merits. Doing so, allows us to manage risk in line with our investors appetite and, by removing the large bank infrastructure, we can pass on these savings to our user through high investment returns. We can therefore attract capital for our borrowers.
