P2P Lending: Thanks Satan!
If there’s one buzzword that should send shivers down your spine and put the fear of God in your heart, it’s “Fintech”.
The “financial technology” sector is about as rife with scum and villainy as the proverbial Mos Eisley, but has evaded gaining a comparable reputation thanks to the clever use of an alternative English dictionary composed of corporate euphemisms for every known human vice. Fortunately for mankind, the cretin that inhabit this sector are easily identifiable by their uniforms: when they aren’t wearing a Patagonia sweater vest, they’re donning a tight polyester suit specifically tailored to not fit them.
One corner of the Fintech sector that is particularly notorious is Peer-to-Peer (P2P) Lending. P2P Lending is a simple enough concept: individuals can borrow and lend money to and from each other without going through a bank. P2P Lending platforms operate as middlemen, often providing credit checks, facilitating payments, or even performing collections. The individual lender can earn interest on the loan, while the individual buyer can receive loans faster, with less scrutiny, and with more favorable rates than via the traditional banking system.
While this concept could work in theory, the fact that the Fintech sector came up with it means that it would inevitably fall somewhere between a pyramid scheme and a home robbery when put into practice. Just last year, one of the largest P2P Lending platforms in the US was sued by the Consumer Financial Protection Bureau for a laundry list of deceptive practices that included falsely advertising 0% APR and an undisclosed “tip your lender” feature that was essentially the equivalent of a Starbucks barista handcuffing you to the iPad until you select their desired gratuity. Even though the CFPBs case was very convincing, it was ultimately dropped due to the incoming Trump administration having different priorities. This unfortunately means no lessons were learned and the inbred offspring of Silicon Valley and Wall Street were given a mere slap on the wrist and once again left to their own devices.
Direct P2P Lending was a sensible enough idea - but it had some drawbacks. For one, it has a slow matching process - it was difficult for lenders to find borrowers that were low risk enough for them to work with. For another, it was difficult for lenders to diversify their lending portfolio without having a substantial amount of money. This led to P2P Lending platforms having high dropout rates among users.
To combat this issue, the fintech sector came up with a new solution: Indirect P2P Lending. Here, individual investors pool their money into the platform, which then allocates the funds to borrowers and pays the investors their share of interest. This is the way that the largest P2P Lending company in China, Ezubao, operated until regulators figured out it was also the largest Ponzi Scheme in history. Ezubao abruptly collapsed, defrauding 900,000 investors out of $7.7B in the process.
So, what’s the point?
Four months ago I was standing in Costco, purchasing my friend a hotdog because he had left his wallet in his car. As he pulled out his phone to send me $1.50, I had an idea.
What if he didn’t need to pay me now?
What if I could finance his Costco hotdog?
Thus was born MicroUsury, my ingenious diabolical Fintech innovation. The idea is simple: small loans between friends. This isn’t a platform for serious commercial lenders and borrowers, nor is this an investment opportunity. This is a fully customizable direct P2P Lending platform for the common man.
MicroUsury would work like this:
A new Usur would sign up to the platform and connect their banking info. They would then be able to create a custom loan, view current loans, view defaults, and view friends profiles.
Every loan is fully customizable. The principal, the interest, the due dates/schedule, the down payment, etc. A lender can be as predatory or as reasonable as they’d like.
You want a Costco hotdog? That will be $1.50 payable over 30 years with %1200 interest and a $0 downpayment. The lender hits send, the app generates a contract, and the borrower reviews and signs.
I love this idea because I know it will ruin friendships and be loads of fun. Other great features could include an in-app credit system (you can see how good your friends are at paying off their MicroLoans), and customizable contracts (you can put anything down as collateral, or insert conditions like “borrower will allow lender to punch him in the stomach if debt is not paid”). You can also see how many active loans a user has, to determine whether they’re overleveraged or otherwise fiscally irresponsible. The risk would be fully on the user, making it completely unviable for commercial use, but perfect for those little trust-based transactions among friends.
Now, I should clarify - this isn’t a “real” idea. In fact, when I conceptualized MicroUsury, it was only intended to be an inside joke amongst my friends.
After witnessing the recent emergence of ‘Buy Now Pay Later’ firms such as the Swedish Fintech ‘Klarna,’ I don’t think MicroUsury is insane anymore. People are now financing Chipotle burritos. We are beyond satire.
I believe MicroUsury is the logical next step in this morally bankrupt Fintech hellworld.
After all, why let the banks have all the fun? I want to cripple my friends with interest too!
BONUS: Here's a riddle for you
100 fingers up
100 fingers down
hands folded, lost
hands open, found
What am I?
I gave this to my dad and he put it up in his office. Neither he, nor any of his staff, could solve it - yet when confronted with the answer, he begrudgingly admitted it was pretty darn good. Are you smarter than an entire medical practice?
If you enjoyed this article, please consider supporting us below. These donations will help us build a video format to accompany the newsletter.
|
