Banks under threat from online lending networks

Some banks are beginning to embrace peer-to-peer lending

Peer-to-peer online money lending networks will have 10 per cent of the worldwide market for retail lending and financial planning by 2010, according to research by Gartner.

Lending platforms – such as Zopa and Prosper – match people who want to lend money with those who need to take out a loan, and often offer more competitive rates than banks.

The sites as set to follow the success of services that introduced new peer-to-peer models such as eBay and Betfair, according to Alistair Newton, research vice president at Gartner.

"Consumers are generally spending more time in social networks which increasingly form part of consumer purchase processes for new products and services," he said.

Last year Virgin Group bought a majority stake in CircleLending, a provider of loan administration services that manages loans between relatives and friends.

And PayPal and Google Checkout have begun performing money transfers in the last year.

Some banks are beginning to embrace the change.

In the US credit unions have begun to team up with Zopa to offer " person-to-person" loans from the bank to borrowers.