How Big is the Peer-to-Peer Economy?

By Charles H. Green

Emily Badger wrote an interesting piece for the Washington Post that raises more questions than it answers. She relates that the micro-entrepreneurship site Etsy now has a more than a million sellers, individuals — overwhelmingly women — making things like barnwood cutting boardshand-sewn tea towels and children’s toys out of their homes or small manufacturing plants.

But, you would not get any indication that many of them exist, however, if you looked at Etsygovernment data on traditional jobs and small businesses. Their businesses are so small as to get swept aside by the definitions of the Small Business Administration, which include firms with more than 500 employees and millions of dollars in annual receipts.

The article makes a distinction between those choosing to work and grow a business from those who are converting a passion, like sewing pillows, into cash as a casual pursuit. How much does this impact the reported unemployment count? What’s the value of this economic sector and when will we get a better definition of ‘small business?’

For lenders, it’s an ominous revelation of a growing slice of the GDP that doesn’t want growth capital and will never walk into a bank. With Paypal, Kabbage and Amazon jockeying to facilitate both credit and cash payments, this market isn’t even up for grabs.

Maybe the silver lining is that the major banks, like Bank of America, JPMorgan Chase and Wells Fargo, can’t afford to watch these kinds of dollars go away. The collective value of the business volume and the scalability of their service providers offers these banks an opportunity to buy into this segment through acquisition.

With their attention and capital committed in this direction, Main Street business shops and stores will remain the domain of community bankers.



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