The deal was part of a $125 million secondary transaction where existing investors sold portions of their shares to new investor Google and previous investor Foundation Capital. No new money is going into the company, rather it is a reshuffling of equity to allow room for Google on the board.

Lending Club is an online community that connects people who need to borrow money with people to lend it to them. Borrowers apply for a personal loan and receive a rate quote. Interested investors fund these loans and automatically receive monthly payments on these loans in their bank account.

“Google was excited about the possibility that Lending Club could transform the banking system,” said CEO Renaud Laplanche in an interview with VentureBeat. “We are using technology and innovation to lower costs, provide more value to our customers, and increase transparency. These are all things Google has done with other sectors, and they are interested in our ability to do that in financial services, which is one of the few last large industries that has not been transformed.”

Lending Club grew by leaps and bounds over the past year and with volume almost tripling. It originated 780 million in loans in 2012 and is on track to do $2 billion this year. As of May 1st, Lending Club had funded $1.67 billion in loans. The company charges an origination fee to borrowers and a servicing free to investors and is on track to generate $90 million in revenue this year. Laplanche said that this impressive traction caught Google’s eye and it approached Lending Club about getting in on the action.

“We talked to our investors and said we wanted Google on the board, but did not want to raise additional capital and wanted them to sell some of their shares,” he said. “There was an increase in share price from last year, which made the transition easier. Our valuation is now at $1.55 billion, up from 550 million, which is a 3 times increase in just twelve months.”

The national average interest rate for unsecured personal loans in the U.S. is just over nine percent, while Lending Club offers between six and seven percent. By circumventing banks, Lending Club is able to offer lower rates. Laplanche had the idea for Lending Club in 2006 after paying 18 percent interest rate on his credit card. He realized that money was helping to fuel an inefficient system and that by allowing people to directly invest in people, it would benefit everybody involved. Now seven years later, the idea has taken off.

With this latest transaction, Laplanche said that things won’t change much initially. Over time, however, there is potential for partnerships. Right now, he is focused on providing the best possible product for consumers. Lending Club primarily deals with unsecured personal loans, but is exploring adding in student loans, auto loans and mortgage loans down the road.

Lending Club has raised $102 million to date and as mentioned above, existing investor Foundation Capital gained a greater stake as part of this deal. This marks the firm’s largest investment ever made over the course of its 18-year existence, with more than $50 million invested.

“We’ve never seen a market opportunity of this size and magnitude,” said general partner Charles Moldow. “In the financial services industry, we are seeing a shift toward the transparency of information and Lending Club is leading the charge. There is a massive restructuring taking place. We believe that Lending Club’s growth has signified that the uses of technology in the financial industry are limitless, extending to a shift in the flow of information, transparency and decision making at all levels. This is disrupting the traditional banking model as we know it.”

Moldow also said that Foundation Capital sees Lending Club as an iconic company akin to Amazon, eBay, Salesforce, or LinkedIn. The financial services industry is massive and ripe for disruption, with large returns to boot. Lending Club has generated 22 consecutive quarters of positive returns for investors and it seems that pattern will only continue. Google will join the board along with such luminaries as Mary Meeker, John Mack, and Larry Summers.

Photo Credit: Rockbadger/Flickr

U.S. “intelligence officials” believe Iran could be the force behind a number of attacks on banking institutions in the United States, according to the New York Times. The attacks, which started in September 2012, focus not on stealing money, but on knocking the bank websites offline.

Financial institutions have had reinstate their websites after cyber attacks overload them, knocking them offline. The affected banks include Bank of America, Wells Fargo, Capital One, HSBC, and Citigroup.

When VentureBeat reached out to Bank of America, the institution said it had no comment on the suggestion that Iran could be behind the attacks.

But James A. Lewis, the director and senior fellow for the technology and public policy program at the Center for Strategic and International Studies, told the Times, “There is no doubt within the U.S. government that Iran is behind these attacks.”

Lewis previous served as an official within the U.S. State Department and the Commerce Department.

The cyber aggression comes in the form of denial of service attacks. These attacks send packets of information at a rate much higher than a server’s ability to process them, overloading the server, and shutting down the website. It’s a fairly common attack since the onset of Anonymous, a group of hackers known for taking political stances and for their propensity to protest using denial of service attacks.

As Forrester analyst John Kindervag notes to the Times, however, the suspected hackers are using more sophisticated methods in their DDoS attacks. Where these attacks are usually launched from individual computers, it seems the attackers have rallied whole cloud networks to send off huge amounts of traffic to the bank servers.

That means Iran, if it is the culprit behind the attacks, could either be building its own private cloud network or somehow stealing less secure, but already established private clouds from other companies. With networks being used to launch the DDoS attacks, that banks are being hit by a substantial force.

Officials also believe the attackers are using a new form of DDoS called encryption denial of service. Since banks process a number of encrypted transactions dealing with the type of data they do, attackers can send hundreds of thousands of encryption requests to overload the servers.

Tactics as complex as these support the idea that the attacks are state sponsored.

A number of groups have come forward to claim the attacks, such as Izz ad-Din al-Qassam Cyber Fighters, who say they attacked the banks because of an offensive video. Others such as a cyber criminal known by the handle “vorVzakone,” posted intent to hack the banks in a campaign called “Project Blitzkrieg” on a Russian forum in September. VorVzakone , however, suggested attackers would hit the banks with malware and actually steal information rather than just knock down websites. Still, McAfee gave weight to vorVzakone’s post, saying Project Blitzkrieg is a “credible threat.”

It seems officials think the former group may just be a front for state sponsored attacks out of Iran, which could be retaliating for recent cyber attacks believed to be joint efforts by the U.S. and Israel. The attacks could also be connected to economic sanctions against the country in recent years.

Bank image via Shutterstock

The caliber of underwriting firm is often an indication of the quality of the issuing company. The investment banks are paid well for that implicit endorsement, but that puts their reputations on the line. Their success is tied to the execution, after market performance and perception of the deals they complete –so they had better be selective and smart.

However, the banks are not infallible. The capital raising process has been inexorably altered by many different changes to the funding environment.  I am not talking just about the botched Facebook IPO either.   But the banks are pretty good.

The playing field between institutional investors and “mom and pop” is not level.  The market is driven by inefficiencies and the average investor is generally on the wrong side of the spread.  The differential comes down to knowledge.

Ironically, retail investors have access to more information today than ever before, but often lack the ability to draw any useful conclusions.  Information comes at the tap of a browser.  Knowledge is a result of years of experience and access to peers and professionals with insights that go well past the prospectus and can’t be found on Google.

Crowdfunding will be a game changer for thousands of companies that are unable to find capital through traditional means.  But I think that the more profound impact will be realized by small investors that will benefit from analysis, both formal and informal, from their peers.

While I know there are many pols and regulators out there who will argue that Crowdfunding will turn into crowdfrauding , I will remind you of the many professionals, analysts and sage financial institutions who got it all wrong.

We forget too quickly the analyst stars who led so many astray.  Do you recall Jack Grubman?  Paid $25 million a year for his valued opinion, Grubman was banned from the financial industry for life in 2003.  The list is long.  Jack just happens to be a colorful favorite of mine.  As the Wall Street Journal reminds us from time to time, the dart board method of stock selection usually fares pretty well versus the pros.

Let a transparent market evolve for crowdfunding and do not allow a group of mandarin gate-keepers control the outcome.  There will always be a place for Investment Banks to create markets and deliver value to their customers. Smaller businesses need access to capital too.  These companies will never be efficiently served by large banking groups – at least not in the near future.

Let Crowdfunding go live in 2013.

Kristin Voinovich is an author at Crowdfund Insider, where this article was originally published.

photo credit: padesig via photopin cc

Symantec spotted a trojan infecting a number of financial institutions today called Trojan.Stabuniq. The virus is a simple one, and it’s seemingly easy to remove, but its discovery highlights the importance of teaching employees about phishing attacks.

The virus attacks more than just banking institutions; 11 percent of those infected were Internet security businesses. Symantec suggests these companies may purposefully have the trojan installed for research purposes.

“A staggering 39 percent, however, belong to financial institutions,” Symantec said in a blog post. “These financial institutions had their outer perimeter breached as the trojan has been found on mail servers, firewalls, proxy servers, and gateways.”

Symantec further notes that the “the malware authors may simply be gathering information,” perhaps in preparation for something more advanced.

The trojan disseminates through phishing attacks. A phishing attack tricks victims into believing they are clicking on a safe link or downloading a known attachment, when in reality they are being served malware. These attacks can be very simple, such as a written email from a prince in Nigeria asking for bank account information. They can also be slightly more complex =, like “email spoofing” or making an email look like it’s coming from a trusted source.

After an employee falls for the phishing scheme, the trojan downloads to the computer, where it disguises itself among the system’s existing files. It might pretend to be a Java Quick Starter or InstallShield Update Service Scheduler — files that look normal on the surface. Then it starts monitoring and collecting the system’s information such as the name of the computer, the IP address, operating system version, any “running processes,” and so on.

These are sent back to the command and control servers and may also be sent to a number of remote locations including one called “bbcnews192.com.”

hat tip Ars Technica; Piggy bank image via Shutterstock

It’s not a pretty topic, but bankers have to learn to be good about collecting money from delinquent borrowers. And the better at it they become, the more they’ll be able to lend money to (hopefully good) borrowers in the future.

So BankersLab has created a “gamified” training simulation — a game, really — to train bank employees how to do collections right. It’s not about who will pay a bank the money they owe it or the best way to get results as a Repo Man. Rather, the CollectionLab simulation helps bankers correctly forecast the impact of debt collection decisions over the lifetime of a bank. The game is part of the Serious Games movement or gamification, where game mechanics are used to improve engagement in nongame applications.

With the simulation, bankers can create competing teams that operate virtual portfolios over a 30-year period. They can test debt-collection strategies in real-world conditions.

San Diego, Calif.-based BankersLab tapped the expertise of Neil Seitz, a professor of finance at Saint Louis University and a pioneer in simulation games for the banking industry. He had created simulations based on spreadsheets, but BankersLab brought the decade-old games into the modern era. Seitz served as an adviser to BankersLab. Game designer Robert Zepeda, the founder and chief executive officer of PlayBasis, helped create the modern gamified simulation program, which is web-based.

As the number of delinquencies and write-offs remain stubbornly high, collections managers are faced with big challenges. Delinquencies on residential home loans rose to 10.61 percent in the second quarter, according to the Federal Reserve. The idea is to improve collection skills by turning the learner into a player, said Michelle Katics, the CEO of BankersLab, in an interview with GamesBeat.

“You can think of them as flight simulators for bankers,” said Katics. “They make decisions and see the impacts play out over years.”

To win, players have to operate the most profitable virtual bank with the most satisfied customers. Katics said bankers have to use their resources wisely. If they make a lot of risky loans, they’ll need to hire more collectors. But hiring collectors drives up costs.

If they can only make so many phone calls to delinquent customers, the bankers have to choose which people to call. Some need coaching or reminders to make their payments. The work requires expertise in staffing, collection management, resource allocation, economic analysis, and product growth. Each module in the game is linked to gamified course materials, online learning, and iOS mobile apps.

Is it fun?

“If you’re in this business and this is what you do, then it is fun,” said Katics.

She added, “The secret to successful delinquent collections is finding the right balance between cost and benefit while still maintaining customer satisfaction. We wanted to create a product that taught professionals how to confidently walk this tightrope.”

Other bank-related simulations address new kinds of products, asset liability, operational banking, agricultural banking, or local territories.

BankersLab was founded in January, and it has 20 employees. It is self-funded and has four founders: Katics, Kurt Gingher, Gail Galuppo, and M. J. Kim. A bank in India has already signed up to use the simulation.

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Edo has raised $15 million in third round funding to brings its local-offers technology to small businesses across the country.

Edo delivers card-linked offers targeted to spenders through credit cards, debit cards, and mobile devices. Unlike many of its competitors, Edo doesn’t require a check-in, or any point-of-sale hardware. Instead, it links to your bank card and then tracks your spending behavior so it knows which offers to send you. Edo directly competes with Cartera and Cardlytics, loyalty companies which are in the race to partner with the nation’s leading banks.

Solutions like these allow retailers to stay competitive. For instance, if you frequently buy sandwiches at Subway (one of Edo’s merchants), you might be offered a free coffee with your next ham and cheese at Quiznos. Edo is currently partnered with 120 banks and more than 200 local and national merchants, including Target, Crate & Barrel, and The Home Depot.

The Nashville, Tennessee-based company says its technology will benefit consumers, retailers, and banks. “Payments and advertising are colliding; to stay competitive, banks must deliver value to cardholders that goes beyond the traditional realm of services, while advertisers are searching for solutions to drive customer acquisition, loyalty, and return on marketing investment,” said Ed Braswell, CEO of Edo, in a statement.

The round was led by VantagePoint Capital Partners, with participation from Baird Venture Partners and other existing investors. Edo has raised a total of $54.3 million to date.

Top Image via Flickr

Kaspersky Lab announced that it’s discovered a new piece of malware that specializes in obtaining login information for bank accounts in the Middle East. It’s called Gauss and is linked to Flame, Stuxnet, and Duqu.

“Gauss is a complex cyberespionage toolkit, with its design emphasizing stealth and secrecy; however, its purpose was different to Flame or Duqu,” said Kaspersky Lab chief security expert Alexander Gostev in a statement. “Gauss targets multiple users in select countries to steal large amounts of data, with a specific focus on banking and financial information.”

Kaspersky found the malware after digging deeper into Flame, a virus uncovered in May that was billed as one of the most advanced cyberespionage tools to date. Researchers said the malware has “striking resemblances” to Flame in the way it was designed. It seems Gauss shares the same source code from which Flame was built. But its actions are slightly different. While Flame installed a keylogger, turned on the computer’s microphone to record audio, and monitored “communications apps” such as IM, Gauss is focused on obtaining financial information.

Gauss is tailored to steal “access credentials” to Lebanese banks, which include the Bank of Beirut, EBLF, BlomBank, ByblosBank, FransaBank, and Credit Libanais. Non-Lebanese entities that are also targets include Citibank and PayPal. This information, along with browser history, cookies, passwords, system configurations, and more, is sent back to the command and control servers. The malware, however, is in a veritable holding pattern since the command and control servers were shut down in July.

Kaspersky estimates that the number of infections are in the tens of thousands, but as of May around 2,500 infections were recorded. This is lower than Stuxnet, but higher than Flame, which Kaspersky says had around 700 infections.

In June, Kaspersky linked Flame to Stuxnet, the famous malware that hit Iran’s nuclear infrastructure in 2010. Many of Flames functions looked identical to those of Stuxnet’s, spurring Kasperky to dig deeper into the connection. Now the research firm says the two may have had creators that worked closely together, even sharing some of the same source code.

Gauss is the latest member of the family.

hat tip Wired; Image via Shutterstock

July 9-10, 2013
San Francisco, CA

Early Bird Tickets on Sale

With the rising popularity of mobile banking — reaching 17 percent of U.S. consumers by the end of last year, a figure that’s grown 4X in the past five year — the research firm Forrester has developed a “Mobile Banking Functional Benchmark” to evaluate how banks approach the new wave of devices.

Forrester applied its new benchmark to the top four banks in the U.S. and found that Chase rose to the top, with a score of 74 out of 100 points. The big break for Chase was in the transactional functionality category, where it earned 26 points more than the average.

“The strong showing results from a wide array of mobile money movement options — transfer functionality, mobile bill pay, and the ability to add a payee, among others — as well as mobile remote deposit capture and other features like mobile P2P,” wrote Forrester’s Peter Wannemacher in a blog post this morning. Chase also scored 90 in the accessibility category.

Forrester says it applies 63 criteria in its mobile banking benchmark and scores them on a 100-point scale. The average score for the biggest four banks in the U.S. was 63. There’s still plenty of room for improvement according to the research firm, as only one bank offered product research and cross-selling through its iPhone app, and none of the banks did well in the mobile personal financial management category.

Banks definitely need to step up their mobile options — the rise of smartphones and tablets is moving much faster than the glacial pace of financial institutions. For example, I’m still waiting for Bank of America to offer mobile check scanning — which Chase, and many others, already offer. Meanwhile, BoA is still touting its envelope free checking deposit as actual innovation.

Mobile banking is a win-win for both banks and consumers, so there’s no excuse not to be more aggressive with rolling out mobile features. Consumers would be able to handle much of their financial errands without waiting in lines, and banks would have less foot traffic (and ultimately fewer irritated customers) to service.

Photo via Shutterstock

Cyber-criminals have stolen Visa and Mastercard credit-card data by hacking into payment processors in New York City parking garages. Visa confirmed that the data — enough to create counterfeit cards — was stolen, and both companies are doing damage control by alerting banks and credit unions for the 56,455 cards.

According to security researcher, Brian Krebs, a group of individuals have compromised the a payments processor, rumored to be Global Payments Inc. The group is believed to be New York-based, targeting the payment systems in New York garages. The criminals gained access through the processor to “Track 1 and Track 2 data,” which gives them enough information to make fraudulent purchases on the compromised cards.

Visa and Mastercard have alerted a number of banks and credit unions associated with the cards, warning that they should be on the lookout for fraud.

“Visa has provided payment card issuers with the affected account numbers so they can take steps to protect consumers through independent fraud monitoring and, if needed, reissuing cards,” the company said in a statement, “As always, Visa encourages cardholders to regularly monitor their accounts and to notify their issuing financial institution promptly of any unusual activity.”

The company takes a small jab at the individual business (potentially the NY garages themselves). It explains that each business accepting credit payments is responsible for updating its systems and putting in place the most recent security measures.

According to Krebs, the PSCU is saying 56,455 cards have been compromised, with only around 1.5 percent of those cards actually showing fraudulent charges. Joe Levy, chief technology officer of Solera Networks, believes there may be more to the hacks, which have occurred in the past in cases like Heartland Payment Systems.

“It would not be surprising if the investigation slowly reveals that the breach involved techniques such as web application exploitation, maneuvering from a compromised public system into the internal systems, and that the presence on the network was a longer-term than estimated,” said Levy in an e-mail. “These tend to be common characteristics of these kinds of events. And it underscores the fact that perimeter defenses are imperfect and will almost always be breached by a sufficiently motivated adversary.”

The hack has seemingly been isolated at the third-party payments processor, according to Visa. Visa’s own systems have not been compromised.

Credit card image via Shutterstock

“ZestCash doesn’t pull any information from credit bureaus. Instead we use uses non obvious variables, like cell phone payment records and how much time applicants spend on our site, to offer loans to our customers,” CEO Douglas Merrill told VentureBeat in an interview.

Most banks approve borrowers for loans based on small amounts of data; usually a credit report and credit score from FICO, a company that evaluates credit risks. Since not every person has enough information on file with FICO, some people are turned away for loans from major lending institutions. ZestCash uses thousands of metrics to offer short-term installment loans to customers who can’t get loans elsewhere.

Each loan is designed by the customer, based on how much money they need — up to $800– and how much time they need to pay it back. ZestCash emphasizes smaller payments over a longer time to pay back its loans to help their customers from getting too deep in debt.

“We will use the $23 million capital from Matrix Partners to add more staff, increase our marketing efforts, and push forward with bringing loans to additional states. We will use the $50 million debt line Victory Park Capital to make loans to customers,” said Merrill.

This fundraising round included $23 million from Matrix Partners and $50 million in debt financing from Victory Park Capital. Lightspeed Venture Partners, GRP Partners, Flybridge Capital and Lighthouse Capital Partners participated as well. ZestCash was founded in 2009 by Douglas Merrill, former Google Chief Information Officer, and Shawn Budde, former Head of Subprime Credit Cards at Capital One and has more than 75 employees. Currently, ZestCash is able to offer loans to customers in Utah, Idaho, South Dakota and Missouri, with more states coming soon.

Taking care of finances is an arduous task. It confronts you with bills, loans, savings goals, and other stressful topics. In fact, these cause so much stress, some people opt to ignore their money all together. Keeping track of your finances is necessary, however, so why not make it easier by connecting today’s technology and our more widespread willingness to organize our finances online?

That’s what the newly renamed Simple (how did they get that URL?) is doing with its front-end financial organizing system.

“Simple is a better representation of what we aspire to. It releases us from the constraints of an industry in desperate need of innovation,” said Joshua Reich, Simple chief executive officer, in an official blog post.

While the financial industry is under fire from Occupy Protests, Simple is attempting to create something new. When you work with Simple, you aren’t quitting the banking system, but you are quitting the bank you usually work with. To replace it, Simple takes your money and invests it in a number of FDIC-insured institutions on your behalf. According to Adam Erlebacher, the vice president of marketing for Simple, the company doesn’t work with the “too big to fail” banks, in exchange for small and mid-sized ones. These institutions are partners with Simple, which has agreements in place concerning fees and other regulations.

“When we’re going out and selecting bank partners we are looking for banks that share our values,” said Erlebacher in an interview with VentureBeat. “As long as bank partners are in line with our philosophy of no surpise fees and clear and transparent terms and  conditions, then we’re happy to work with them.”

The BanCorp Bank in Delaware is Simple’s launch partner.

Simple’s front-end acts as your organizing dashboard, allowing you to see transactions under the “safe-to-spend” header. This view does not show you all of the money you have, but rather the amount of money you can spend per day to stay within your goals. These goals include savings goals, bills commitments, loan paybacks, etc. You set the goals, and Simple calculates what you can spend each day to stay within those parameters.

Setting up a savings goal in Simple is fairly easy to do as well. On the savings page, you enter the amount of money you’d like to save and scroll a bar over to the date by which you’d like to have the money. You can lock a savings account down, to deny yourself access, or pause it if you don’t want to add any more money to that pot.

In creating this dashboard, one of Simple’s main goals was to make the search function as close to natural language as possible. You can type something like, “Restaurant from November in Portland” and Simple will find the restaurant for you. You can also search based on amounts spent, and each transaction comes with a detailed description as well as a map to the location of the transaction. If these details are often correct, given the direct connection to the bank, it’ll be a significant improvement from the Mint finance app, which regularly gets transaction locations wrong.

Like Mint, Simple also pre-categorizes your transactions and allows you to create your own categories. It also lets you tag transactions with names of friends, or other reminders to help you recall purchases at the end of the month.

“There are lots of people who feel really comfortable with these intense budgeting platforms,” said Erlebacher, “But for most people, the idea is getting fast answers from your finances.”

Regular customers will be able to sign up for Simple by requesting a beta invite. Those with an alpha set up do not have to re-sign-up for the beta. In its blog post, Simple reminds, “[we] replace your bank, but we are not a bank,” which may set off alarms with people. However, while having a third party distribute your money amongst different institutions is jolting, that’s a price you’ll pay in any industry for convenience.

See below of a video on how Simple works:

Based near the OWS encampment in San Francisco’s Justin Herman Plaza, Prosper is using crowdfunding site Indie Gogo to host its 99 Sandwiches campaign, raising money to donate 99 sandwiches per day to feed the protesters.

But Prosper’s own platform has the power to do more than donate sandwiches. It could shake up the banking industry at large, if its model catches on.

“Everybody knows that banking is broken, the system is broken,” Prosper co-founder and chief executive officer Chris Larsen told VentureBeat at Crowdconf, a crowdsourcing conference in San Francisco, today. “There’s no reason with the technology we have today, all this great stuff, that you couldn’t completely rewire banking in five years.”

That’s a bold claim.

Prosper makes it possible for individuals to lend out money and earn interest  on the money they lend, which has been the sole province of banks. But the reason this was not possible before wasn’t lack of technology, but because of regulations meant to protect banks.

If successful, Larsen thinks that the future of the banking industry could be Silicon Valley, not Wall Street.

“You need banking, but you don’t need banks,” said Larsen.

In order to launch his company, Larsen invested $10 million and spent five years fighting through a bramble of regulations meant to protect banks and stifle innovation. As evidence of the banking industry’s hold over the political system, Larsen pointed out that there are 61 members of the House Committee on Financial Services, the legislative entity that governs banking and finance. He said that there are perhaps two startups that exist today that are able to charge interest on peer-to-peer transactions, out of as many as 100 that were started around the same time as Prosper.

In a recent blog post, “Why Hasn’t a Facebook of Banking Emerged,” Larsen implored anti-Wall Street protesters to use new technologies to support the movement, and support innovation.

…[W]hile it’s important to keep up the demands for change, we also need you to start using these new technologies and spreading the word when you find one that excites you. Use a crowdfunding site to support a project, make a $25 bid on a peer-to-peer lending site. Start-ups are, well, start-ups, and every show of community support could make the difference between obscurity and escape velocity. Vote with your wallet.

This last point is an important one.

Larsen does, however, think there’s a role for banks in preventing their own demise, and he encourages them to make their infrastructure available to startups, as a platform for innovation.

“[Y]ou don’t have to just stand by and get pummeled….Even if these start-ups are tiny now and even if their stated mission is to destroy your franchise, partner with them. Technology is not going away, it’s accelerating with or without you. It’s time to stop cutting your R&D budgets and start embracing new, big ideas.

While Chase bank may have an iPhone app that allows customers to make deposits to their accounts by taking photos of checks, Larsen says this type of solution is “bolting on little pieces to a system that isn’t serving people well.”

Prosper has funded more than $271 million in person-to-person loans to date. As a startup, it has received $74.5 in investment from Jim Breyer of Accel Partners; Tim Draper of Draper Fisher Jurvetson; Jerome Contro of Crosslink Capital, CompuCredit; Omidyar Network; Capital One Co-founder Nigel Morris of QED Investors; Court Coursey of TomorrowVentures and Larry Cheng of Volition Capital.

Larsen’s last company was eLoan, which he co-founded in 1998, and eventually took public.

Prosper is going to need luck, time and a lot of support if its going to have a chance of taking on the multi-trillion-dollar financial industry, which accounts for 7 to 8 percent of the U.S. gross domestic product, twice as large a proportion as it commanded in the 1960s. Chances are slim that executives at banking giants like Citibank or Bank of America are worried much about Prosper, if they have even heard of it.

Such long odds don’t daunt Larsen, who has passion to push him forward.

“We’re in a crisis here. We have a yield-starved world, and we have a credit-starved world, which is kind of funky. That means banking is truly not working.”

Related articles

• Protestors block bank entrance, snarl traffic in San Francisco (venturebeat.com)
• Dylan’s Desk: Is it time to occupy Silicon Valley? (venturebeat.com)
• Lendio and Prosper.com Bring Personal Loans, Affordable Capital to Small Businesses (prweb.com)