Some of the financial sector is informal – friends or relatives lending to one another. In recent years, intermediaries have stepped into these markets. These companies typically match people looking to borrow with people looking to lend. The individuals set may of the terms, and the intermediary does some monitoring and information revelation about borrowers. An example is the company Prosper. What is interesting is that this is like banking light – instead of lending to banks and having banks lend to other people, people lend directly to people, setting their own interest rates and terms with some guidance and information from the intermediary.
Economists have been doing interesting research on this financial market (see Kellogg grad Enrichetta Ravina and Sarah Miller). This market is largely unregulated, and, with unregulated finance having become a large concern, the GAO just did a report on the industry. Their report, here, lays out the issues in regulating the market and describes two possibilities: leaving things roughly as they are or putting the market participants under a regulatory authority such as the CFPB. Interesting issues. If regulation proceeds, this will give a host of interesting information about financial issues from the analysis of the transition from unregulated financial market to regulated financial market.