The new models for peer-to-peer lenders, claimed by their proponents to create agile businesses that will disrupt traditional banking, carry their own set of financial and operational risks. This was the starting point for a presentation at Macquarie University's Financial Risk Day by Simon Schwarz, executive director at boutique private equity fund manager Adexum Capital and zipMoney advisory panel member.Schwarz, who was also chief operating officer for marketplace lender SocietyOne in 2015, spoke on Friday about "risk fundamentals for successful peer-to-peer lending" to an audience of industry professionals and finance academics.Rather than talking up his book and selling P2P as a replacement for the banking sector - given its low cost and lack of capital requirements - he explained what can go wrong for peer-to-peer lending platforms.The risk that he singled out as "peculiar to P2P operations" was agency risk, saying it was "fundamentally different" to that faced by banks because the credit risk for non-performing loans is retained on bank balance sheets, while P2P platforms pass credit risk to their investors.There are two stages of P2P agency risk: in the early stages there is an incentive to maximise volume and reach a break-even point, as the platform operators take a fee for every loan that is funded through their platform - yet moving too quickly risks loosening underwriting processes."In the long run, though, the viability of peer-to-peer platforms depends on meeting the expectations of investors [while] maintaining integrity in underwriting," Schwarz said. Another unique risk is that a P2P operator may just close its business, even if loans matched through the platform are performing, if it remains unprofitable for its owners."That creates a reputational risk for the entire sector if a few of the poorer quality peer-to-peer lenders fall over," Schwarz said, suggesting that there should be some industry standards to limit this sort of damage.There are now several different models for P2P lenders, and Schwarz used the two largest peer-to-peer lenders in the Australian market as examples:•    SocietyOne: matches borrowers with lenders directly for the full term of the loan.•    RateSetter: attracts investment onto into a pool of assets for shorter terms than the loans - often six months, one year, three years - with the inherent "balance sheet risk" that when an investor wants to redeem their investment, the platform must find another investor to roll the capital in.In the question and answer session that followed his presentation, Schwarz was asked about institutional borrowers entering the sector and picking off the most credit worthy loans, leaving retail investors with the riskier investments."In the US, in particular, there has been a raging controversy in the last few years [where] peer-to-peer retail investors have been displaced by large institutions and hedge funds - not necessarily because their analysis is better, but because they are buying in such volumes that they can crowd out small investors," he said."So, equity of access has become a real issue, [leading] the markets in the US to self-regulate as they don't want to be