Peer-to-peer banking

Peer-to-peer banking is a term used in the blockchain banking industry and designates an act of value transfer without the need for an intermediary such as a bank.

Peer-to-peer banking is an online system that allows individual members to complete financial transactions with one another by using an auction-style process that lets members offer loans for a specific amount and at a specific rate.

Definition in the traditional banking
Buyers have the option to look for an amount and rate of interest that meet their needs. All members are categorized by their risk level. Members can browse for other people based on various demographic information.

Since P2P banking does not use third-party banking institution intermediaries the rates and terms are often much more favourable for the members.

Unlike conventional banking where the spread between deposit rates and lending rates is consumed to finance the bank's administrative and logistic expenses, both lenders and borrowers get to save on such costs while paying certain commissions to the P2P portal provider and/or the credit rating agency.

P2P banking and financing have been proposed as a method to accelerate the development of renewable energy projects while more equitably distributing the return on investment. These concepts have now been instituted by Energy in Common and Kiva in their green funds.

Old models
The following two pictures show the difference between the peer to peer banking approach and the normal way with a financial institute.