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January 22, 2009


Last night I headed over to NESTA who hosted the first webank event in London. The focus was on social lending, the key question whether people can replace institutions. Many thanks to Rohan Gunatillake for hosting such a stimulating evening.

It showcased Zopa, Kuberamoney and Midpoint & Transfer, all as examples of a new wave of social lending platforms and alternatives to traditional financial services.

And they’re interesting not least because they listen and replay how their audience describes them – an ‘anti-bank’ was one description, ‘like ebay for money’ was another that have both been used as descriptions for Zopa. And it listens to that, it’s a business that knows its identity is located to a great degree in the minds of its audience.

New social lending platforms tend to welcome the ways in which consumers choose to engage with them far more than established financial services do; they’re set up to be fluid social networks as a fundamental and maybe that’s where the rub is.

Nesta webank 210109

In a lively panel debate, James Gardner represented the conventional banks well when he speculated on whether or not the 'people-replacing-institutions-model' can scale and, as long as the focus is on functional transactions rather than on social contracts, he may well be right to have his doubts about this.

Open source economics tends to turn somewhat around things that people can believe in. It turns on soft intangible attributes like confidence and trust, the lack of which has hit the markets so harshly. ‘Beware the moneylender’ has been a call handed down through the ages; it’s hard to believe in money for money’s sake and this is where many financial service providers are arguably becoming vulnerable to new platforms and competitors.

As brand trust for financial institutions is on the floor we have to ask where did it all go wrong? As the economic downturn has garrotted profits we’ve seen banks retract from the consumer rather than embrace them, and sweat over transactional value as opposed to relationship value, creating a real sense of alienation. In this regard, no amount of socialwash can save them.

There’s a need for the personal investment and lending markets to switch sides if they are to be resuscitated. There’s an opportunity for banks and financial service providers to re-examine the core of their purpose and brand essence to find the philanthrophic idea that can form the bridge to new markets and opportunities.

In his Inaugural address Barack Obama referred to alienation in society as being one of the single most divisive issues we face today. The philanthropic ideal is real and pressing. It’s this that powers businesses like Zopa.

If asked in that context whether people can replace institutions, it’s not a matter of scale and it’s not a matter of margin. The question becomes whether a social contract or a functional contract is paramount and to what degree they can sit together as part of a viable business plan.

Given the choice, the pre-existing trust network is a far more attractive platform for any kind of business than the factory. Given the choice between retracting back to transaction or connecting because of the social contract the answer here too is very probably, ‘yes we can’.


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