Still, the Wall Street makeover — some would say takeover — of P2P lending is raising concerns as the new players begin securitizing loans and clamoring for more. Insiders predict a day when the loans are regularly sliced, diced and securitized, hedged, traded on secondary markets and tracked by exchange-traded funds.

At the very least, the big players’ entry runs counter to the original notion of P2P lending as a populist alternative to the high stakes world of Wall Street. The term “peer to peer” has become something of a misnomer. Some of the latest lending platforms are ditching individual investors altogether to focus on big lenders.

Acknowledging the growing role of institutions, Ron Suber, the president of Prosper, says the industry as a whole is better described as “online consumer finance.”

Jeremiah Owyang, the founder of Crowd Companies, an organization that helps corporations navigate the so-called sharing economy to which P2P belongs, was more blunt. “It won’t be P2P for long,” he said.

Algorithmic Cherry-Picking

When Len Kendall, a digital-marketing executive in Chicago, was considering striking out on his own in 2012, he knew that he would have to live leaner. One place to cut back was his credit cards. Despite having an excellent credit score, over 700, he was paying 17 percent interest on about $10,000 in credit card debt. That was when he heard about Prosper.

He applied for a loan and within days was approved for $10,000 to be paid back over three years at 7.5 percent interest. This loan was funded by dozens of small investors, who typically split investments over a large number of loans to diversify their risk. “It was a pretty simple decision,” Mr. Kendall says. “Why should I pay more in interest than I have to?”

Lending Club and Prosper focus on prime and near-prime borrowers, that is, consumers with FICO scores higher than 640. The platforms apply their own credit models and assign borrowers to categories reflecting their level of risk. In the case of traditional loans, banks pocket the profit. On P2P sites, the individual lenders do. “The difference is who’s benefiting from it,” says Renaud Laplanche, the founder and chief executive of Lending Club. Prosper and Lending Club take a small origination fee from the borrower and 1 percent of interest payments to the lenders.