Social lending takes 10% share
Over at Technology and Finance, Tom Groenfeldt reports that Gartner is forecasting that in two years, ten percent of all retail lending and financial advice services will go to social banking applications.
Now, if that's true, its rather a bother for banks everywhere. 10%? That's real money no matter how you slice it.
We've been looking at social applications in financial services for a while now, and the killer problem is that they cannibalise share from the core businesses that banks are in. That makes it rather hard for bankers to structure the right business case to take social applications forward. What we need now is a new way of creating business value in social. We need to find a way for banks and customers to be equal partners in the overall social value equation.
In the meantime, however, this is somewhere we've been before. Who ever thought, just a few years ago, that PayPal would be so important? Now, they're so big (and with a banking licence!) that competitive responses are somewhat limited.
Personally, I think the Gartner forecast is aggressive. That doesn't change the fact that social applications in financial services are important, and will be getting more so with time. So we'll need to be certain that our natural tendency to be cautious is balanced with ensuring that we have the right experiences for customers in time.
It does seem to me, though, that banks are becoming less slow in their adoption of new things. Perhaps thats a reflection of being involved in bank innovation, but it's a good thing, because it is pretty obvious that emergence rate of the new is speeding up.
Technophiles were pretty excited lately by this bullish report from Gartner. Bullish or not, it's sure that p2p banking is now in the radar and probably here to stay.
Developing innovations within the banks, in the market or developing banks' absorptive capacity this is a discussion that has now a lot of material to be based upon.
Anyone interested should come to the next BarCampBank in San Francisco - http://barcamp.org/BarCampBankSF. We will be debating this first hand.
James, by any chance, will you be joining us?
Posted by: FredericBaud | February 20, 2008 at 11:07 AM
I think that one way for banks to innovate with social lending is by facilitating its customers base with social lending services just like online banking. With this the bank will have a unique proposition to fulfill the intermediaries then today’s social lending services do.
Posted by: Gilga | February 20, 2008 at 12:04 PM
"ten percent of all retail lending and financial advice services"
I'm sure no-one takes these kinds of projections from Gartner particularly seriously, but they are specific with their language.
10% of all retail lending, no chance.
10% of financial advice through social networks, sounds plausible.
Posted by: Dave Birch | February 20, 2008 at 09:06 PM
I've been interested by companies like this one: http://www.wesabe.com/.
They seem to offer something useful and really hard for a bank to achieve.
Existing institutions have the hardest time migrating towards social networks. In the UK we could have an easy dominant player if BT decided to step into the social network space. BT already knows who my friends are because I call them. And yet the amount of corporate change required to achieve this seems an impossibility.
Posted by: Alex Andronov | February 21, 2008 at 10:55 AM
Am I looking the wrong way? I can't find the report of Gartner with that 10%-prediction. I'm curious what facts resulted in this prediction. Sounds a bit too optimistic to me.
Posted by: Erik van Roekel | February 22, 2008 at 07:34 AM
I think it remains to be seen how successful corporations can be in the 'social' sector? We've just seen the first fall in Facebook users, which is far from a demise, but does suggest that as social networking sites become swallowed up by corporations they lose the spirit that attracted many users in the first place.
The key will be ease of use at the point of need. Financial service offerings need to be at the exact point in the user journey which is why PayPal has been so successful.
It surprises me that we haven't seen more tie-ups between financial services companies and the online sellers of goods. Yes, these exist behind the scenes under the seller's badge but we then miss out on the value derived from recognised financial services brands and a more competitive product offering.
Posted by: Mark Mazza | February 22, 2008 at 10:31 PM
My take might be somewhat different, yet still support the Gartner contention.
My thought is that Banking will change as a result of internet forces. A large part of that is "social", however defined.
The evolution will involve new companies, and existing Banks.
Posted by: Colin Henderson | February 23, 2008 at 09:15 AM
Erik, you can find the original press release here: http://www.gartner.com/it/page.jsp?id=597907.
As James and others point out, 10% is unrealistic by 2010 ... and most people are still nervous about these developments, e.g. what happens if your money isn't paid back. Sure, I can insure it but it's not secure like a bank (apart from N.Rock).
On the other hand, Bill Clinton's expounding the wonders of Kiva, so this educational process will take hold and change things.
10% by 2015 if you ask me.
Posted by: Chris Skinner | February 29, 2008 at 11:51 AM