The Bankwatch

Tracking the consumer evolution of financial services

One way innovation will occur in banking

With this headline and the accompanying description, yet another step in the evolution of social lending takes place.  This is a good thing.  Certainly we are undergoing a period of extreme transition and pressure to develop the right model within social lending, but the outcomes are beginning to offer some clues to the future, and some clarity.

Fynanz halts p2p lending; markets student loan platform to credit unions

We have opened up our platform to financial institutions that wish to establish a student loan program

The matter of regulation of the industry is now certain, at least in North America, and no doubt other jurisdictions will follow.  The other matter which is front and centre here, aside from how well they are doing it, is the potential for integration of effort between traditional FI’s whether Credit Unions or Banks, with social lenders.

For years Banks have attempted to reduce their costs through introduction of so called cheaper channels, and while they have gained from reduction in traditional tellers the reality that the bease promise of a cheaper platform has not been met.

The reality is that most bank innovation efforts to date are quite bank centric and draw customers back into their current model.  I think true innovation is likely to take place outside the current bank model.  That is why it is so important for the nascent industries such as social lending to be able to gain a footing, and while it takes time, it is useful to see Lending Club, Prosper Marketplace, Fynanz, and Greennote all active with the securities regulators.   [note Lending club is already up and running under SEC approval]

So I am a supporter of [reasonable] regulatoin in order to get the new industry of social lending operational and to help drive sustainable innovation.

Written by Colin Henderson

January 12, 2009 at 04:22

2 Responses

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  1. Colin,

    I believe that we are at a stage where we should definitely prevent misguided regulation to crush innovation. The SEC or the heads of actual banks do no seem like the right persons to devise an appropriate answer for the entire community. We certainly need a more bottom-up approach to look for the right solution.

    I believe it goes even further than that. There are deep flaws in some parts of the financial system and we should be prepared to rebuild them from the ground up.

    I believe we should start to think in the terms of “Refounding Finance”.

    People interested in this discussion – and many other themes concerning innovation in banking and finance – should join us for our BarCampBanks in London on Feb 14 – http://barcamp.org/BarCampBankLondon2 – and in San Franscisco on Apr 25 – http://barcamp.org/BarCampBankSF2 .

    FredericBaud

    January 12, 2009 at 05:19

  2. […] debate is currently moving on the terms of a longer term solution (see posts in Javelin Strategy or The Bankwatch for example). And there, things do not look good […]


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