According to the Wall Street Journal, former Citigroup (C) CEO Vikram Pandit is helping fund an upstart in the peer-to-peer lending industry, joining a growing movement that's trying to disrupt the traditional banking model.
The former executive is helping to fund a new company called the Orchard, whose seven employees share office space in downtown Manhattan.
Pandit’s new company is helping introduce a new idea into the lending industry.
In peer-to-peer lending, ordinary people and institutional investors make loans or parts of loans to individuals, businesses and other borrowers. The lenders are able to examine credit scores and other data before funding deals, which can be in chunks as small as $25. They receive interest and principal payments on the money.
Orchard aims to start advising institutional clients on choosing loans and navigating regulations in January, and plans to launch the secondary market later in the year. It is proposing to carry not only loans from Prosper and Lending Club, but dozens of other peer-to-peer securities, including mortgages and student loans.
Orchard is just one of the companies jumping into the new movement.
“There is a demand frenzy,” says Dan Ciporin, a partner at Canaan who is on the board of Lending Club, which Canaan also backed. He noted there are more than 50 platforms now offering peer-to-peer loans. “This is the new way we’ll see banking.”