The last in our series of banking system alternative posts is on peer to peer money lending, a popular solution to borrowers unable to use traditional lending methods and lenders looking for non-traditional investment avenues.

Prosper and Lending Club

Prosper wants to “connect people who want to invest money with people who want to borrow money”. They, and a slew of new peer-to-peer money lending services like Lending Club and Zopa, are doing this through of money lending marketplaces where you can lend money to individuals around the world without going through a financial intermediary such as a bank or other traditional financial institution.

Borrowers, who might need money to buy a car or for mortgage payments, complete an online application, and their creditworthiness determines the interest rate of any potential loan. Most of the time, the interest rates offered are generally lower than those of credit cards. The P2P companies then match the borrowers with lenders willing to risk funding the loan.

As a borrower, P2P lending sites offer a great alternative to traditional banks, and often offer better rates and repayment terms. For lenders, P2P lending is becoming a pretty solid investment vehicle, which can be a lot more profitable and secure (as long as you manage risk properly) then traditional long term investment vehicles like 401k’s.

There is some great information available about lending on these peer to peer markets for fun and profit, check out Mr Money Mustache for one of my personal favourites.

We’ve been following a ‘traditional banking alternatives’ trend here on the MergePay blog, you can see our previous posts on Simple banking, our new favorite bank, and the cheaper alternative to international currency transfers TransferWire in our archives.

Today, we want to cover the very popular topic of BitCoin – a digital currency that has been gaining a lot of traction recently.

The Digital Currency: Bitcoin

The subject of a lot of controversy over the past year or so, Bitcoin is a new kind of money. Essentially, it’s a decentralised electronic currency that’s not controlled by a single organization or government.

As a digital currency, Bitcoin is completely distributed. The network of users is made up of users like yourself so no bank or payment processor is required between you and whoever you’re trading with. This decentralization is the basis for Bitcoin’s security and freedom.

With it’s focus on anonymity, security and independence from government or regulatory organisations, Bitcoin is becoming (in)famous for it’s suspected usage in illegal, narcotics and black market purchases.

Bitcoin is also being heralded as the saviour for dying economies and currencies on the verge of seeing massive fluctuations in value. Europeans, Cypriots in particular, are well aware of the ongoing financial crisis and we have all been given a stark reminder that governments, as well as banks, can fail (as if the recession wasn’t enough). Talks of the worlds first Bitcoin ATM being set up in Cyrus suggests the currency becoming a shield against bank shutdowns and Government cotastraphies that previously would have destroyed the common man financially.

For businesses, especially online companies that operate in areas where payment providers are known to steer clear, leaving the company without no way accept payments, Bitcoin is now proven enough to be used as a payment method. Because Bitcoin conducts transactions peer-to-peer, there’s no intermediary to prevent the funds from rolling in.

For more information on Bitcoin, visit WeUseCoins.com and LifeHacker’s excellent summary of the currency. An up & coming, and fairly easy to use bitcoin wallet is Coin Base.

Following on from the previous post on alternatives to traditional banking systems highlighting simple.com and their high tech, service-based approach to banking; today’s post covers a cheaper and easier alternative to a major profit center for the banks of old – international money transfers.

TransferWise

I hated sending money abroad through bank transfers, it would always cost more then I expected, especially when I factored in the banks skewed exchange rate and quirky fees. So I was relieved to come across TransferWise, who aim to revolutionise the way we transfer money abroad.

Started by Skype’s first employee Taavet Hinrikus and his partner Kristo Kaarmann, Transferwise is a platform that gives anyone access to the same mid-market exchange rates that banks get on their interbank market, with TransferWise charging a flat fee of £1 for each transaction regardless of the amount being exchanged.

Keep in mind that traditionally, consumers pay between 3-6% for foreign currency payments through their bank. Transferwise highest fees are way below that, and they have a simple, online interface to manage it all.

It is definitely worth looking at Transferwise as a an alternative to expensive foreign currency transfers offered by traditional banks. Check them out at TransferWise.com

Here at MergePay, we’re all about simple and frictionless solutions to everyday problems. Collaborating on various documents through Google Docs, quickly sharing interface screenshots for our new iOS app through Dropbox (just a heads up, the new app looks awesome!) and instantly clipping relevant notes we find to evernote; there’s no better feeling then finding new workflows and systems that save you time and just make your life easier.

I’m starting to find, and you might have noticed this as well, that innovation outside of the tech space is all about simplifying, clarifying and removing friction. Instant, digital delivery of pretty much any type of media. Automated taxi systems that make use of the GPS functionality of your phone to find the nearest cab. 2 minute Coffee Lattes. Building relationships through 140 character messages on Twitter. Everything we do nowadays is quick and seamless.

Most people have everything they need, as working men and women, most of our base needs are covered. What we don’t have a lot of, however, is time (and subsequently, patience). If the American dream of old was built upon the pursuit of happiness and security, the new American dream is focused on building upon strong foundations and optimisation.

With all of this streamlining of previously clunky processes, why has the banking system remained so stale?

A flurry of new businesses and platforms have entered the scene as of late, aiming to change the way we look at and handle money. Over a series of insightful posts, we are going to cover a few of our favourite bank and financial system alternatives. First up, Simple:

Simple Banking

Billed as the “worry-free alternative to traditional banking”, Simple has a goal of providing features you care about and excellent customer support… in other words: the things most banks do terribly.

Simple aims to remove worries about fees, always keep you aware of how much money you have, and alert you about changes instantly. They do this by offering customers free checking accounts and data-rich analysis of their transactions and spending habits.

You sign up, receive a Simple VISA card that you can use to withdraw cash from an ATM or make purchases like you would with any bank debit card.

The real fun starts when you begin to see instant updates and alerts on your iPhone or Android. The mobile apps also has features like ‘Safe to Spend’, which tells you exactly how much money you can spend right now, Photo Check Deposit which allows you to deposit checks using your smartphone’s camera and Smart Transaction History which tags where, on what and if any tips or fees where added to your transactions. Simple’s web app offers a powerful search tool which ties into this to locate any transaction based on several factors.

The best part about Simple; it integrates seamlessly with MergePay to track and monitor all of your bills and expenses. Request an invitation at http://simple.com