At some point Prosper will need a way to differentiate itself from Lending Club. What's the new value proposition?
Same as the old value proposition. An extensive open database of past history. This gives every lender who is willing to do the number crunching a fighting chance to identify worth while risks.
Prosper has changed so dramatically and so often over the years, that the past history is practically worthless in trying to price current risk.
I disagree, but not completely. I think Prosper has taken what they learned about risk from 1.0 and from 3.0 and has incorporated that risk into the Prosper Rating (and they continue to do so by tweaking the P.R. every so often). Therefore the performance of loans relative to the rating is much different from what it was with 1.0 where the rating was based solely on the FICO. Right now, the Prosper Rating IS what differentiates them from LC (and better db programmers too).
I think what they are aiming for with the Prosper Rating is to so accurately asses the risk and apply the perfect interest rate that all loans would on average yield about the same minimum ROI. Of course this is an unobtainable goal but still a good goal to aim for. It seems to me that they have some people at Prosper that really know their statistics and IMO they are doing a pretty good job (maybe even a better job than I could do
). With this leveling of the playing field they are allowing lenders to more effeciently use their own resources/judgments to further increase yield. Those resources/judgments are of course come from the Q&A, vetting, googlology and whatever other criteria a lender may want to use (i.e. not lending to people who have A1 steak sauce bottles in the picture). But of course many loans right now don't have time for Q&A but when they get more listings up then loans should fund a little slower.
Prosper isn't fully there yet, but they are getting closer and I am impressed.
