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Peer-To-Peer Finance Connects Borrowers and Lenders

Peer-to-peer finance sounds like a concept born to be ridiculed. Finance demands oversight and networking through peers rather than a central authority, suggests a fundamental rejection of institutional scrutiny.

Call it a cautious rebellion. In February, Prosper opened what it calls "America's first people-to-people lending marketplace." It's a site that helps users borrow and lend money among themselves without the involvement of banks. Though the company says it hasn't been around long enough to disclose its user base, it claims to host over 1,000 active loan listings and 800 active groups.

This summer, a company called Zopa will bring its British brand of peer-to-peer finance across the pond and offer it to residents of California. Zopa began operating in the U.K. in March 2005 and currently counts over 60,000 members.

Both companies are flush with venture funding. Prosper has raised about $20 million from Accel Partners, Benchmark Capital, Fidelity Ventures, and Omidyar Network. Zopa has raised about $23 million from Benchmark Capital, Bessemer Venture Partners, and Wellington Partners.

Chris Larsen, CEO and co-founder of Prosper, likens his company to eBay, except that instead of providing a forum for listing and bidding on products, Prosper lets users list and bid on loans.

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