How It Works

Notary model: This is another peer-to-peer lending business model. As in the other models, the platform acts as an intermediary between the lender and the borrower, matching them to each other. The lender then bids on the loans they want in their portfolio; once the amount of money required is reached the loan is originated. However, instead of originating the loan themselves, a bank originates the loan. The platform then issues a note (the name “notary” stems from the issuance of notes instead of contracts) to the lender for the value of their contribution to the loan. This note is considered by many jurisdictions to be a security.27 This, therefore, shifts the risk of loan non-payment to the lenders themselves and away from the bank originating the loadn.28 The fee structure is similar to that in the client segregated account model. This model is popular in the US, particularly with platforms such as Prosper and Lending Club. This is summarised in Flow Chart 2.

Flow Chart 2: Notary model