The philosophy of credit unions is members helping members. Credit unions can easily embrace the peer-to-peer lending concept. Why should they do it? As creditunionmagazine.com suggest Zopa is an innovation that can help credit unions with their image – they can get hip again.
The roles will be shared in this win-win partnership. Borrowers will be members of the credit unions, whereas Zopa lenders will provide the money. The big advantage for Zopa lenders could be that a possible business model is that the lender lends to the Credit union which gives a CD to the lender. The podcast suggest that there will be no default risk for the lender. Credit unions see it as a good customer acquistion strategy.
The credit risk or loss of your principal investment would not apply in the US model. So what would happen is. Most everyones familiar with going onto Ebay. You can either bid on the item and take a risk on what you pay for it. Or you can do a buy it now type option. With a fixed rate CD you would get a buy it now option which would still be market leading rates or you can do a process which I call a variable rate CD with the credit risk spread out amongst borrowers and if a few people go into default maybe you do not get as high a rate, it goes down a little bit but still much better than the market rate. That adds some excitement to the product offering as as well.
Addison Avenue Federal Credit union has signed a letter of intent with a peer to peer lending service. "We see (person-to-person lending) pretty closely aligned with the credit union mission and as a way of attracting new members," says CEO Benson Porter.