Thursday, November 8, 2007

Prosper and the Community

I have always been perplexed by the relationship that Prosper has maintained with it's lending community. Just since I've been paying attention, there have been the equivalent of online riots in the Prosper forums over group rewards, personal information, blenders (borrower-lenders), confirmed (yet unconfirmed) features, and information hiding. Some have consisted of lenders trying desperately to have Prosper recognize a problem in the marketplace (group rewards), while others have been because Prosper has made seemingly arbitrary changes to the system without explanation.

I am convinced that if you were to ask any Prosper employee whether having a strong community was good for Prosper, they'd agree. Yet, at the same time, when Prosper changed the system to hide old listings, Prosper Andrew defended it by saying:

We don't expect that you're going to like this change. But like a lot of changes that we have made to the site, we made the choice to protect borrowers' privacy.

This left a bitter taste in many mouths because of the often stated question "Yes, but why?". Opportunity after opportunity, Prosper stops just short of actually engaging with the community and having a dialog. When Prosper stops short on the full answer to the question, their detractors fill in the blanks and their supporters have no possible retorts. The most rabid detractors easily characterize Prosper as yet another large bank-like entity out to screw everyone in their path.

And herein lies the problem. Prosper is run by banking and finance executives. Looking through the management ranks, the majority have banking backgrounds. This is critical for Prosper to navigate the financial and legal hurdles required to run their marketplace. Yet, at the same time, it is not an environment built around interactive communication with a community. It's a legal minefield. Banks communicate reactively, and are always secretive about their reasons.

When something changes with my bank, I find out after the change. "Last month, the yield on your savings account was 3.5%". "To meet the legal notification requirements, we're informing you that the terms and conditions for your credit card have been modified - a copy of the new terms has been included." And good luck finding the change. I have never had a bank explain why they're making a change (though an occasional credit union will) and have never had one inquire as to my opinion or acknowledge my opinions place in their operation. That is how banks are, and how they probably will be until the end of time. Prosper, a company run by banking and finance executives, has inherited some of the less communicative aspects of it's executives.

I am a strong believer in the P2P lending concept. However, I think individual companies will rise or fall based on how they interact with their lenders and borrowers and run their community. Communities do not like having parents saying "it's this way because I said so", but are looking for a dialog among peers. Admittedly, I do not know any banks or brokerages running forums and allowing its employees to interact with actual customers. However, this is not the end of the journey, but the beginning.The question is whether Prosper will overcome its banking and finance roots or will someone else beat them to it.


Anonymous said...

Good post. Once lender see Prosper as just another financial institution they lose the marketing advantage peer to peer lending once gave them


Tom said...

Good post Mike. You used the word "perplexed". I'd have to say that I often feel the same way when I read the Prosper forums. Sometimes they are just so negative. Generally I think that most borrows and lenders don't feel like they have a strained relationship with Prosper but there are certainly some very public break-ups.