news

STATEMENT

of the

Honorable Nydia Velázquez, Ranking Member

Committee on Small Business

“The Power of Connection: Peer-to-Peer Businesses”

January 15, 2014

Thank you, Mr. Chairman. 

Technology has long been a catalyst for entrepreneurship. Just as small businesses often drive some of the most important scientific breakthroughs, developing new products and services, major technological advances also create opportunities for small firms to reach customers.  This symbiotic relationship between entrepreneurship and technology has been an important source of economic growth and job creation. 

In keeping with this trend, development of the peer-to-peer business model has created new channels for entrepreneurs to sell goods and services. Technology innovators are harnessing the web to create new platforms and markets that allow the selling, renting and trading of everything from apartment space to transportation to artisan craft goods.   The numbers strongly suggest that this new, “sharing economy” based largely on interactions between consumers – rather than traditional brick and mortar businesses – is here to stay.  On a single Friday night, 150,000 travelers are finding rooms to let from private homes on the Air-b-n-b website.  More than 1.5 million Internet users have used “Task Rabbit” to hire people for odd jobs.  Lending Club, which facilitates loans between consumers, has led to $2 billion in lending so far -- and doubles almost every month.  eBay has seen products sales reaching nearly $70 billion in a single year. 

One reason for this sector’s rapid growth may be rooted in broader economic struggles.  With job growth still sluggish, enterprising Americans and dislocated workers are seeking new ways to replace revenue.  Renting out rooms, providing lifts in their car, and selling homemade food goods have all become ways for ordinary Americans to experiment with entrepreneurship and stay afloat during tougher economic times.  

While the explosive growth of these networks has created new opportunities, their rapid rise raises questions.  As always, it is important that consumers utilizing these sites be protected against fraud and unscrupulous actors.  Most of these sites contain review and rating systems to ensure users on both sides of these transactions live up to their commitments.  However, as the popularity of peer-to-peer transactions grow and become a larger part of the mainstream economy, additional safeguards may be necessary.   As always, the challenge will be ensuring businesses and consumers are protected without quashing or discouraging promising innovation.  

Many peer-to-peer networks are themselves small businesses.  Others are larger entities, but are helping self-employed Americans and small firms identify new channels for reaching customers.  It is important that as this technological revolution advances, government policy keeps pace.  As of yet, the Small Business Administration’s initiatives appear ill-suited to help bolster this growing sector – something that I hope can be rectified.   It is also important this Committee fully understands what’s happening in the new “sharing economy” and has a grasp on how we can minimize risk for consumers, while maximizing growth and productivity from peer-to-peer business models. 

On that note, I’d like to thank all of our witness for taking the time to be here.  Your perspectives will add significant value as the Committee seeks to learn about this rapidly emerging marketplace. 

Thank you, Mr. Chairman.  I yield back the balance of my time.

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