Introduction & Context
Prosper  is a highly effective global e-business. Prosper is a virtual marketplace where lenders and borrowers can meet each other’s lending and borrowing needs, bypassing the need for a bank. Prosper self-advertises as “cut[ting] out the middleman”, or the bank in the lending process. In reality, the e-business serves as a middleman, albeit taking a smaller commission on the borrowing and lending transactions and providing superior product efficiency and usability (See Figure 1). A key difference between banks and Prosper is that loans are not made by the business itself, but rather by 3rd party individuals or institutions.
Figure 1: Prosper loaner view: prospective borrower marketplace listing, risk & return projections 
As of April 2015, Prosper is valued at $1.9B USD .
Prosper borrower default rate remains at 5.2%, in line with that of major banks . Figure 2 shows a detailed Prosper rating breakdown.
Figure 2: Prosper Rating Estimated Average Annual Loss Rate
Prosper is critically dependent on attracting prospective borrowers and lenders onto its’ platform. Prosper enables 5.99% – 36% APR $2000 to $35000 loans, and provides returns in line with borrower’s credit risk. Lenders assume borrower risk of default, which increases with a decreasing credit rating – Prosper does not carry federal insurance (FDIC).
Investors can select to invest as little as $25 and thus diversify risk among multiple individuals of similar or differing credit risk ratings. By allowing investments in smaller increments, Prosper is enabling loan investing to individuals with limited financial capabilities, who perhaps would not be otherwise able to invest in loans.
The online marketplace interface allows for expedient and easy-to-use interface in seeking funds or making loans.
Prosper advertises to those in need of credit card debt replacement and refinancing options .
Rate calculation formulas for borrowers, like any other lending institution are typically not public information. However, it is known that credit history, such as number of inquiries, payment delinquency, available credit etc. and borrower supplied information, is taken into account when formulating a Prosper Rating . Loan candidates applications are verified through Prosper. Based on empirical data, Prosper notes 100% positive returns for diversified lenders (i.e. defined as a Prosper investor that has invested in more than 100 notes – a minimum of $2500).
Figure 3: “Competitive Returns” Prosper Rating Graphic 
Two channels exist for investment. First, individuals can purchase notes, from Prosper Funding LLC, 100% owned by Prosper Marketplace. This framework is known as peer-to-peer (P2P lending. Second, wholesale investors (i.e. accredited institutions, investors such as banks, finance professionals) can purchase entire loans (similar to mortgage traded securities). While Prosper originated as P2P marketplace, Figure 3 shows a dramatic change of direction towards wholesale in recent years.
The Prosper prospectus states that individual ‘notes’ investors are protected by default risk of Prosper Marketplace.
Prosper marketplace offers, on average, more competitive loan terms, more transparency and quicker decisions than traditional institutions.
Prosper has a non-traditional loan model with several key advantages over traditional banks. The E-business commerce setup reduces fixed costs borne by physical infrastructure (e.g. bank branches) and automation, databases, software and technology improve and expedite the borrowing and loaning experience.
Prosper has set audacious goals, based on listening and repurposing offerings to customers’ needs, fitting and redacting the senior management team to goals accordingly, and enabling a culture of constantly seeking feedback. 
Seeking growth, Prosper has been searching for new potential customers, which could benefit from an alternative loan marketplace. In 2Q15, Prosper acquired American Healthcare Landing, a software firm that connects healthcare system users who may require additional funds for surgeries. In addition, Prosper is also collaborating with smaller community banks. 
Prosper is further looking to expand into incremental financial services, in order to better compete with banks. The acquisition of Billguard, an app that helps consumers monitor finance activity, signals that Prosper is serious about expanding consumer offerings .
In the past couple of year, Prosper has partnered with Wall Street heavy-weight banking institutions, experiencing dramatic growth in whole loans, relative to fractional loans.
Figure 4: Prosper loans by type 
Recent tragedy may instigate governmental inquiries in evaluating whether online lending goes through the identical screening as traditional lending mechanisms .
Note: All resources accessed on December 9 2015.