P2P Lending Coming to Canada

It's a bit of an old story, but peer to peer lending is coming to Canada. I probably wouldn't have commented about this if I didn't see a rather distressing graph (note: that site is not affiliated with prosper) of delinquency rates on Prosper, a popular peer lending site in the USA. The figures seem to indicate that maybe 20% of loans will be delinquent in a year. Granted that's all loans lumped together and doesn't compare higher risk borrower's default rates compared to lower risk ones that should be lower. Despite things like that, I think peer lending will really tack off in Canada. I base it off the following observations:
1) Word of mouth marketing - Each user will probably become an advertiser in some way and peer reviews are by far the most effective form of advertising known
2) Financial ignorance - Most people really don't know all that much about financial options that aren't specifically recommended to them, advertised on a bill board, or had some close personal friend tell a story about a personal experience. Even if they qualify for something like a personal line of credit, people will turn to a pay day loan or a credit card cash advance for a quick bit of cash between pay days because they don't know better. On the other side of things, there's a significant number of people who're not familiar with investment products beyond those recommended by their local bank. Further more, in that group a fairly substantial portion of them are completely lost when it comes to mutual funds, and find the growing plethora of GIC options difficult to keep up with. I know this is a rather substantial number of people, as I was the one who originally told my parents about RESPs.
3) Familiarity - People generally understand what could cause personal loans to default. However they're unfamiliar with things such as what drives the production costs and market value of steel.
4) Feel vibes - It feels good to be helping someone out, whereas faceless corporations who float a debenture are still faceless and people have trouble relating to them.
5) Small increments - Lets face it, the extension of financing options to lower and lower priced items is a sign that people are struggling to cough up amounts like $300, let alone the $5000+ it might cost to get a board lot of a major company. Being able to "invest" $50 is going to be an appealing feature to people
6) Lack of a TVM calculator - People are always amazed at how kids can possibly forget languages when they grow up. I am always amazed at how so many adults are so far lost when it comes to math that I'm not sure I can bring them back up to speed. The lack of a TVM calculator confuses the return people will get

For all these reasons, people will take to peer lending and promote it as a great thing. There will be people who'll see a decent return and make things sound easy. Those will be few compared to the masses, which I'm expecting will see an average return somewhere between 2% to -2%, and the distribution will probably be skewed towards the lower end.
Take a big step back and look things over objectively. A $50 loan over one year at 15% will see monthly payments of $4.51 (I have a tvm calculator and know how to use it). Over the course of the loan, if it doesn't default, you'll see $54.12, or a net gain of $4.12. How much time do you want to put into researching this loan?
This of course is a fairly optimistic view. 15% is getting into higher risk categories. 10% gets $52.80, 8% gets $52.20, those rates suggest safer bets. As the payments start rolling in, you need to continuously review new creditors. Suppose we go for 10% and against all odds we have no defaults. Let's go on to assume that we want to a modest $15/month, or $180 over the course of the whole year. You're going to initiate a rather large sum of loans, then keep approving new loans to keep your money in the market. Trying to figure out just how many loans need approving is a rather tricky math problem.
This calls for spread sheet time, another tool that I wager most people out there don't know how to use. After much number crunching, I'm estimating that it'll take reviewing an average of about 5.5 loans a month and keeping a portfolio of about 65 loans. If you want to use minimum wage ($8.4/hr) as a bench mark, you have about 20 minutes to find each loan assuming that none of the loans in your portfolio require attention. Even in this hopelessly optimistic scenario, it's almost like working a job, and involves more risk.
There are definitely better, more passive investments out there for people who have the ability to pull together a few thousand dollars every now and then. For the matter, when you factor in the time and adjust returns for defaults, a regular high interest savings account might be a better option. You can move in one cent increments, and the money is liquid too.
Though hey, it's almost like a game you can play for bragging rights, popularity and real money.