No Middleman

UK-based Zopa, a place where creditworthy consumers who'd like to borrow money can get together with other consumers who are happy to lend it to them. Cutting out the middleman, lenders set their own rate of return and choose which borrowers they want to lend to. Zopa manages various 'markets', matching lenders with borrowers' various risk profiles. Intrepid lenders might choose borrowers at a lower credit band who can give them a higher rate of interest. Cautious lenders can choose borrowers at a higher credit band, but then of course the rate will be lower.
To reduce overall risk, an individual lender doesn't actually lend to an individual borrower; instead a lender lends money across at least fifty Zopa borrowers, and similarly a borrower borrows from a group of Zopa lenders. All lenders and borrowers enter into a legally binding contract with their respective borrowers and lenders. Zopa manages the collection of monthly repayments and if any of that money is not paid on time, it uses exactly the same recovery processes that mainstream banks use.