It sounds like if Prosper could improve its ability to weed out fraud loans before they are funded and improve their collection rates on late/defaulted loans, this P2P lending concept might just work.
The thing is, Prosper does
nothing to catch fraud loans before funding. The ONLY thing they do is check that the bank account exists. Period. After a loan funds, they occasionally do some verification (discussed in other threads). Prosper never intended to do pre-funding verification, and they don't have the funds or people to do it, and they won't start. That simply isn't part of their business plan. It would be expensive and slow. Their plan was basically just to be a loan facilitator.
You can read elsewhere about how lenders have reported listings that looked fraudulent--even some where we had evidence--and Prosper did absolutely nothing, allowing the loans to fund (and then default).
And the collection rates have been and continue to be bad. The worst part is that Prosper hardly seems even to try.
I'm not sure P2P can work, because a bunch of individuals with limited experience would have to be smarter or better informed than the banking industry. But even if it can, Prosper's not the one that will make it work.