A year ago I posted two comments about the Peer-to-Peer banking phenomenon warning that bankers should open their eyes and look closely to this new social media upshot. Despite the attention this issue has attracted even in banking-related circles the mainstream bankers have their mind elsewhere. Many of them are busy to salvage what is left from their businesses and reputation following the sub-prime (or maybe sub-brain?) scandal.
But what happened with my predictions about the bright future of the Social Banking initiatives? One of the citizen banking examples I mentioned, the British Zapa, keeps growing and has just expanded in the US market while my other example of last year Prosper.com claims to have increased its number of members to 730.00 (from 140.000 last year) and the loan volume to $150,000,000 (up from $ 27.000.000 last year). Gartner expects that by 2010 the social banking will account for 10% of the total retail banking in a number of countries. This sounds a bit too optimistic but my experience with the Internet is that nothing is impossible. So let's wait and see.
In the meantime we keep following the serial of banking bankruptcies or almost bankruptcies, downswings and chain reaction effects of the sub-prime scandal (and its economic side effects on the world economy) that will go down to the management history as another example of disastrous corporate governance.
Until the bankers recover from this new hangover the "citizen bankers" will happily continue growing. Although the danger for the banking industry to follow the fate of the music distribution oligopoly, the incumbent travel agencies and others who felt victims of their inability to understand how the Internet has reshaped the marketplace is not imminent, if I was a banker I would be worried more than last year.
Showing posts with label E-Banking. Show all posts
Showing posts with label E-Banking. Show all posts
Peer-to-Peer (P2P) banking: After mergers and acquisitions one more headache for Bankers ? PART 2
Wednesday, June 13, 2007
Short Summary of last week posting (Part 1): A new generation of Peer-to-Peer (or Citizen-) Banking web sites appear to attract enough attention of the public. Should traditional bankers worry?
Part 2
Is it possible that the incumbent banks will share the fait of the travel agencies, music industry, telephone operators and the newspaper classified adds who experienced a sudden and substantial loss of business to online competitors before they even understand what’s going on? The scenario is not unlikely at all; the past experiences has shown that many of the revolutionary Internet ideas tend to expand as a virtual pandemic after reaching a users’ critical mass. Take the examples of SecondLife, Google, Wikipedia, MySpace, Digg, Flickr, Skype and YouTube to name some of the familiar names. These are brands that have attracted millions of followers in very short time and without any promotion. I dare to predict that the same will happen with the Peer-to-Peer (P2P) banking sites, provided that they reach the critical mass of users that will put them in the radar of giants like Google, eBay, Yahoo or Microsoft (and why not of Amazone or WallMart) who constantly look for interesting ways to expand their online business. Experience from recent high-profile acquisitions of Internet businesses points to the fact that the industry giants have no problem spending billions of dollars in order to further strengthen their online position and expand their market reach. Having said that it is not so difficult to imagine what will happen if Google or Yahoo add zapa.com, Boober.nl or any other similar online Peer-to-Peer bank to their assortment: from small and local these names will become overnight big and global and most probably fierce direct competitors of the traditional banking by offering to hundreds of millions web users an interesting virtual banking alternative. The worst case scenario for the traditional bankers is that most probably the citizen banks will expand their assortment to more categories of financial services and products. Do banking CEOs and strategists need to worry? After all banking is not like every other industry since reliance (based on personal contact and interaction) is a core banking value that the Internet cannot provide. Moreover banking is an economic activity meticulously regulated and followed by governments and financial authorities. Can these and other possible problems stand in the way of citizen banks? Again looking to the Internet history I would argue that online concepts embraced by users develop their own momentum and can expand beyond the reach and control of industries, governments or any kind of watchdogs.The important question to my opinion is whether the banking world has noticed these developments and has given any thought to this threat, provided that they consider this as a threat at all. One would expect that guided by past experience banking executives and strategists should seriously consider making the first step, ahead of the Internet giants. The online P2P banks are still cheap and therefore easy to acquire, while the risks are relatively low.Will the banking world try to preempt? Looking again to the past this sounds very unlikely. Experience shows that incumbents are very slow to react to the fast and often uncontrollable developments in the cyberspace. If this is the case here, it is interesting to wait for the next chapter of the Online Citizen Banking story
Part 2
Is it possible that the incumbent banks will share the fait of the travel agencies, music industry, telephone operators and the newspaper classified adds who experienced a sudden and substantial loss of business to online competitors before they even understand what’s going on? The scenario is not unlikely at all; the past experiences has shown that many of the revolutionary Internet ideas tend to expand as a virtual pandemic after reaching a users’ critical mass. Take the examples of SecondLife, Google, Wikipedia, MySpace, Digg, Flickr, Skype and YouTube to name some of the familiar names. These are brands that have attracted millions of followers in very short time and without any promotion. I dare to predict that the same will happen with the Peer-to-Peer (P2P) banking sites, provided that they reach the critical mass of users that will put them in the radar of giants like Google, eBay, Yahoo or Microsoft (and why not of Amazone or WallMart) who constantly look for interesting ways to expand their online business. Experience from recent high-profile acquisitions of Internet businesses points to the fact that the industry giants have no problem spending billions of dollars in order to further strengthen their online position and expand their market reach. Having said that it is not so difficult to imagine what will happen if Google or Yahoo add zapa.com, Boober.nl or any other similar online Peer-to-Peer bank to their assortment: from small and local these names will become overnight big and global and most probably fierce direct competitors of the traditional banking by offering to hundreds of millions web users an interesting virtual banking alternative. The worst case scenario for the traditional bankers is that most probably the citizen banks will expand their assortment to more categories of financial services and products. Do banking CEOs and strategists need to worry? After all banking is not like every other industry since reliance (based on personal contact and interaction) is a core banking value that the Internet cannot provide. Moreover banking is an economic activity meticulously regulated and followed by governments and financial authorities. Can these and other possible problems stand in the way of citizen banks? Again looking to the Internet history I would argue that online concepts embraced by users develop their own momentum and can expand beyond the reach and control of industries, governments or any kind of watchdogs.The important question to my opinion is whether the banking world has noticed these developments and has given any thought to this threat, provided that they consider this as a threat at all. One would expect that guided by past experience banking executives and strategists should seriously consider making the first step, ahead of the Internet giants. The online P2P banks are still cheap and therefore easy to acquire, while the risks are relatively low.Will the banking world try to preempt? Looking again to the past this sounds very unlikely. Experience shows that incumbents are very slow to react to the fast and often uncontrollable developments in the cyberspace. If this is the case here, it is interesting to wait for the next chapter of the Online Citizen Banking story
Peer-to-Peer (P2P) banking: After mergers and acquisitions one more headache for Bankers ? PART 1
Thursday, May 31, 2007
Talking about Internet Marketing to a banking audience a few months ago, I mentioned at some point that if I was a banker today my worst nightmare would be the moment that Internet giants like Google, eBay, MySpace or Yahoo decide to enter the banking business as online banks. The participants thought that I was obviously joking since no one tried to challenge this idea or to follow-up to the discussion.
A few weeks ago this episode came back to my mind reading the news here in Holland: the online bank Boober.nl opened its virtual doors for business, as a loan auction. Boober.nl will act as an intermediary, charging a commission of 0,5% per transaction for intermediation and creditworthiness control, between people who want to either lend or borrow money but want a better deal than the deals traditional banks are offering. The idea of Peer-to-Peer banking is simple: Wannabe citizen bankers can offer their money against an interest rate that is higher than the interest of saving accounts or other similar types of investment to borrowers against interest rates that are lower than the interest of banking loans and bank credit. The whole setting is not much different than the millions transactions in second hand articles taking place between people, facilitated by the thousand online auctions eBay style or exchange portals.
Searching the web I came across more such online banks like Prosper.com in the USA that recently closed their first year in business with 140.000 members and loans of $ US 27 mil. and the British Zopa.com with more than 110.000 members already. The message seems to appeal to a large audience segments: the first day of operations the massive interest for Boober.nl put the server out of the air and according to the data published in the site up to now loans of about Euro 850.000 (over $ US 1 mil) have been booked.
The total amounts of loans are still low but this kind of developments should cause some uneasy feelings to banking boardrooms. The fact that online Citizen Banking has not made headlines yet is not important. Looking back to the history of the Internet we have plenty of examples of incumbents who woke up one morning to find out that a chunk of their business had left them for ever (the click-and-mortar travel and vacation sector and the traditional bookstores were among the first to experience this) migrating to unknown online companies with strange names.
Next week : Part 2
A few weeks ago this episode came back to my mind reading the news here in Holland: the online bank Boober.nl opened its virtual doors for business, as a loan auction. Boober.nl will act as an intermediary, charging a commission of 0,5% per transaction for intermediation and creditworthiness control, between people who want to either lend or borrow money but want a better deal than the deals traditional banks are offering. The idea of Peer-to-Peer banking is simple: Wannabe citizen bankers can offer their money against an interest rate that is higher than the interest of saving accounts or other similar types of investment to borrowers against interest rates that are lower than the interest of banking loans and bank credit. The whole setting is not much different than the millions transactions in second hand articles taking place between people, facilitated by the thousand online auctions eBay style or exchange portals.
Searching the web I came across more such online banks like Prosper.com in the USA that recently closed their first year in business with 140.000 members and loans of $ US 27 mil. and the British Zopa.com with more than 110.000 members already. The message seems to appeal to a large audience segments: the first day of operations the massive interest for Boober.nl put the server out of the air and according to the data published in the site up to now loans of about Euro 850.000 (over $ US 1 mil) have been booked.
The total amounts of loans are still low but this kind of developments should cause some uneasy feelings to banking boardrooms. The fact that online Citizen Banking has not made headlines yet is not important. Looking back to the history of the Internet we have plenty of examples of incumbents who woke up one morning to find out that a chunk of their business had left them for ever (the click-and-mortar travel and vacation sector and the traditional bookstores were among the first to experience this) migrating to unknown online companies with strange names.
Next week : Part 2
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