The social networking Web site operated by Facebook Inc. is moving into peer-to-peer lending with a pair of new services.
One of them lets Facebook users lend one another money, and the other is a game where players try to guess whether loan applicants will be approved.
The Facebook site builds online communities of people who have high schools, colleges, or employers in common. Those who want to interact with other college students, for example, would register using their college e-mail address.
That inherent sense of community may help lenders feel more secure.
"Facebook offers … a lot of built-in trust," said John Donovan, the chief operating officer of Lending Club Corp. in Sunnyvale, Calif., which announced its peer-to-peer service Thursday. Its service is accessible solely through the Facebook site and can be used only by registered Facebook users. Borrowers post a request on the Facebook site, and lenders can choose whether to fund part of the loan.
Prosper Marketplace Inc., which operates a peer-to-peer lending site available to anyone, has a similar model. It and Lending Club say their lenders are generally able to earn higher interest than if they left their money in a bank account. Borrowers, however, typically pay lower rates than they would if they borrowed from a bank.
Mr. Donovan said his service is more automated than Prosper's, which lets borrowers set their own interest rates. "We give them an interest rate and we tell them what credit group they would be in," he said.
And while Prosper, which was founded last year, lets lenders choose and interact with each person to whom they lend money, Lending Club builds a portfolio of loans for lenders tailored to their social connections.
Mr. Donovan said 300 people had downloaded Lending Club's software through Facebook by midday Friday; the software was made available Thursday night to Facebook users. Some had already begun filling in applications to borrow and lend money.
Mr. Donovan said he does not think Lending Club competes with Prosper or other peer-to-peer lending sites such as the one operated by Zopa Ltd., of London.
Each lending site has its own way of establishing trust between borrowers and lenders, so each has a distinct audience, Mr. Donovan said.
Prosper is also promoting itself on Facebook through a software plug-in that tracks the status of online loan applications. The plug-in, Fantasy Banker, lets users bet from a pool of 100 points whether certain loans will be funded by Prosper's lenders. (They cannot bet on Lending Club loan applications.)
Prosper, which offers membership in a various shared-interest groups, reduces lender risk and loss by allowing funding of portions of loans, so that if a borrower defaults the loss is spread among all the lenders.
The company has said that in its first year it processed more than 7,200 loans, broken into 295,000 pieces.
