Posts Tagged ‘P2P lending’

Is the iPhone going to revolutionize banking?

July 14, 2008

Ron Shevlin wrote a post this morning about why the iPhone isn’t going to revolutionize banking. His point is that there may be some evolution, but not revolution. My counterpoint is that when talking about degrees by which these things happen, it can be difficult to draw a line between these two. And waiting for that line to become bright is a risk that some might not want to take.

Ron thinks that there are too many people rushing in to these revolutionary technologies. I actually think it’s the opposite: there are far more people in the financial world who are taking a wait and see attitude than those who are claiming there is a revolution and jumping in feet first. It’s just that the feet-first types are the vocal ones who make the noise and get the attention. Because, really, who wants to admit they are going to take a wait-and-see approach? I give props to Charles Bruen for taking a hard-line wait-and-see stance on mobile banking.

But let me back up to Ron’s bigger issue; what is revolutionary and what is evolutionary? While it is indeed hard to determine what is truly “disruptive” and “revolutionary” (yes, these words are used too often) at the time they are occurring, nevertheless, some of these things DO take root and create significant change. As one example, in 2005, Facebook had but one million users. Hardly a disruptive revolution, right? But it had momentum and was growing fast, and now has 80 million users. That would make Facebook the fifteenth largest country in the world if it were a country. Three years ago, most people had barely heard of it. Today it’s a part of the culture. When exactly did it go from a blip on the radar screen to mainstream?

I believe the same is true for mobile banking, P2P lending, and PFMs. Yes, these revolutions are not happening violently because banking isn’t sexy. But if there were any way I could get off the sidelines and do something with these technologies, I would be in the game. I give huge props to Gene Blishen for being light years ahead of the curve on what mobile banking can be and do.

Dan Dickinson, in a response to Ron’s post, asks if there is anyone on twitter who does NOT use an iPhone, and states that he will never buy anything made by Apple. As far as the game-changing nature of the iPhone and mobile connectedness, this misses the point.

The point is this: for those of us who were tethered to a desk in order to use our PCs and access the net, laptops were a revolution. Now you could go anywhere with a laptop, be connected/do your work, but you could only connect to the entire internet when you found wifi, which was rare or expensive and often both. With an iPhone (and to some degree any smart phone) you can connect to the net ANYWHERE you have a cell phone connection, which these days seems like just about anywhere. That’s powerful, game changing stuff, and also not as clunky and bulky as a laptop.

But again, here’s the real reason why people LOVE their iPhones, and why it’s indeed a paradigm-shifting, disruptive, revolution (he he!): Because it’s so FREAKING PERSONAL. iPhone owners feel that it’s “my” internet on their iPhones, it’s MY connection to MY friends and MY music and MY phone and MY pictures and MY contacts and MY address book and MY calendar and MY videos and MY games and MY apps! I can customize it with pictures of MY friends and MY kids on MY home screen, and take a photo ANYWHERE I am and instantly email it to my friends. Try wrestling away any device (no matter whether its an iPhone or something else) that has so much personalization and connection… it can’t be done. And to the extent that BlackBerries and Treos do this too, well, yes, that’s why their users love them just as much as us Appleheads love our iPhones.

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P2P Lending and market leader advantage

June 26, 2008

Twit/blogger friend Mike Templeton, online manager of the Iowa CU League’s The Members Group, a payment processing CUSO, tweeted this morning that another twit/blogger friend, Ron “The Shevlinator” Shevlin was just quoted in an Aite Group report about large banks starting to have success with marketing online. This report reminded me that Ron recently commented on Open Source CU that he was secretly skeptical of the future of P2P Lending sites, (like Prosper), because someday banks will wake up and smell the coffee, and simply do it themselves.

Woah, Ron, hold on there. You may be right, but I think you are wrong on this point, and here’s why: Why haven’t banks and credit unions gone running to develop their own P2P Lending solution as of yet? For most FIs, there are many reasons: 1.) They haven’t heard of P2P Lending. 2.) They don’t see why lots of people would jump on this. 3.) They aren’t legally able to do it. 4.) They don’t see it as significantly different than what they are currently doing. 5.) It would canibalize their own lending business 6.) Their field of membership/geographic reach is too small to make the investment in technology infrastructure worthwhile 7.) Most FI’s don’t have the resources in time, expertise and dollars to invest in such an effort.

But say you ARE a huge bank, and do have the time, expertise, and resources to roll your own P2P Lending solution. You still have a number of strikes against you.

1.) Prosper has a multi-year headstart on you. This headstart is significant in customers, transactions, reputation, and expertise, both technological and tactical.
2.) Why would people choose you over Prosper? This is where reputation is all-important. If you’ve been fee’ing your customers to death, they’re not going to come running to you just because you announce you have P2P Lending.

I can hear the counter-argument now: “Prosper is a niche presence that most Americans have never heard of.”

Indeed, while the current membership of 725,000 is a small percentage of all Americans, it is nevertheless big enough to make it the fourth largest credit union in the nation if it were a credit union. And Prosper is growing fast, and is now starting to advertise. Also, while this membership is still relatively small, it is composed of the early adopters. While the mega-banks have advertising budgets that may exceed Propser’s entire operating budget, for the most part, the people who would go online and use P2P lending are not the ones that would be influenced by television and other mass-media. The people who utilize P2P Lending are the people who are involved in social media, such as blogging, Facebook, Twitter, LinkedIn, Brightkite, etc.

Prosper has what I call the eBay advantage. eBay is not the best auction technology that exists. I’m sure Christie’s and Sotheby’s have superior auction sites. But eBay is where everyone is, which is an upward cycle. All the buyers are there, which means that all the sellers go there, which means that all the buyers go there, etc. And the other thing which continues to make eBay the place to go for your online auctions is the issue of reputation. Hundreds of thousands of people have carefully managed their reputation in online buying and selling on eBay, and this reputation is not transferable. All these folks are not going to leave behind their reputation on which they’ve expended huge effort. And now that Prosper has community reputation features in P2P lending and borrowing, all the more reason why Prosper will remain the place to go in P2P Lending.

Okay, that’s my two cents, tell me why I’m wrong! 🙂

Prosper turns two; P2P Lending accelerating

March 17, 2008

I’m a little bit late in blogging a happy second birthday to Prosper, but hey, better late than never. It’s interesting to me that there are many (perhaps even a majority of) people in the financial world who talk about Prosper as an interesting “experiment” that may or may not work. Let me attempt to blog yet again, that Prosper IS working, and growing at a rather stunning rate, right at this very moment. (Sadly, many financial professionals are probably still not familiar with P2P Lending, two years after its U.S. launch, and three years after its British launch.)

There are many who are skeptical, and rightly so, about making unsecured loans to strangers via Prosper. But let’s look at the facts. At Prosper’s current growth rate, they will probably surpass 1,000,000 members before the end of the year, which, if it were a credit union, would make it the third largest in the United States. When Prosper celebrated its second birthday on Feb 13, this year, it had 580,000 registered members, and has done $117 million in loans. (At that membership, Prosper would already chart in at sixth on the list of largest credit unions, behind Navy FCU at 3 million members, SECU of NC at 1.4 million members, Pentagon FCU at 770,000 members, and The Golden One CU at 680,000 members, and Security Service FCU at 630,000 members, and ahead of Boeing Employees CU with 530,000 members).

Clearly, there ARE people who are embracing online P2P lending, whether it’s Prosper, Zopa, or Virgin Money.

Last month, Jim Bruene of NetBanker blogged a new development at Prosper, which aims to cut default rates through social capital, namely personal recommendations. This looks to have proven successful so far, and is a clear example of direct monetary value associated with social capital.

The idea that national credit unions could exist with a defined target market is one that Jesse Robbins indirectly voiced with his Building the Black Rock Credit Union blog, and later Tim McAlpine at Currency Marketing articulated, and Ron Shevlin and the CUSkeptic satirized. Well, in a certain sense, Propser has already brought this concept to life via its borrowing groups. Just a cursory glance at the community reveals groups for entrepreneurs, Harvard alumni, Vietnamese Americans, musicians, military veterans, artists, teachers, restaurateurs, personal financial advisors, health care professionals, and even Apple fans. (Here’s one for folks who are LGBT). In other words, just about every type of group that credit unions were created to serve, but with a much deeper and richer variety, and with a national horizon.

As a side note, in researching this post, I discovered that Javelin Research says that online P2P lending may reach $159 billion by 2012.

Props to Doug True for working with Zopa to offer NCUA-backed P2P Lending.

Congratulations Credit Unions, on a Century of Service

March 12, 2008

I have the great honor and pleasure of talking to credit union professionals all over the nation. The subject of the proud history of CUs, holds special meaning to me because I had worked with the movement for about ten years before I learned ANYTHING about its incredible history. I certainly had no idea that the movement started in my backyard, a hop skip and jump across the border, in Manchester, New Hampshire.

I gave a talk on social media and World 2.0 this morning to a group of about forty credit union marketing professionals from Massachusetts, Rhode Island and New Hampshire at the CU League’s headquarters in Marlborough, Mass. I asked about the movement’s founding, and it was wonderful to get a detailed answer. In our presence was a representative of that very first CU, Andrea Pruna of St. Mary’s Bank. Not only did she know the date by heart (November 24, 1908), but she let us know about a wonderful section of their web site devoted to this, the Centennial Year of Credit Union service. I encourage everyone to check out Celebrating 100 Years for a terrific look at the amazing road we’ve traveled so far.

This is one of the reasons I’m especially excited that BarCampBank NewEngland will be held in America’s Credit Union Museum on April 5. The museum is the actual house where St. Mary’s Bank first began operations 100 years ago, out of the home of Attorney Joseph Boivin, who served as the CU’s President. If you listen very carefully, you may hear the whispers of the generations that have preceeded you when you stand in the parlor of the building.

Shout-outs to so many of the fabulous credit union marketers who came today. Thanks to Jon Reske and Anne Pinkerton from UMassFive College FCU, Mark Vautour from Telephone Workers CU, Deena Bernier from NMTW Community CU, and Debra Perrin from Southern Mass CU. I’m not good with names, so I haven’t remembered those who I met for the first time, but thank you also. It was fun that we had four one-billion-dollar CUs represented as well, Greylock FCU in the Berkshires, HarborOne CU in the South Boston area, DCU of the Worcester area, and Navigant CU in RI. Thank you to Rob Kimmett for organizing a great event and inviting me, and it was wonderful to catch up with CU whirlwind Bonnie Doolin.

My presentation today included demonstrating and explaining Twitter, Facebook, blogging, and showed examples from Shari Storm and the Verity CU team, William Azaroff of Vancity CU and Change Everything, Ginny Brady, board member of UFirst FCU with the Boardcast, and Tim McAlpine of Currency Marketing with Larissa Walkiw, spokesperson for Young and Free Alberta, and her infamous Credit Union Difference video part one, currently at 16,228 views. On the topic of Facebook, I have started writing a paper on the Facebook as Marketing Engine and plan on publishing excerpts to this blog. For those interested in checking out twitter, here’s the one-page PDF of Twitter Tips.

I also touched on Peer-to-Peer Lending (P2P Lending), Prosper’s amazing growth rate, and how CUs can participate by getting in touch with Doug True, SVP of Lending, at Forum CU. Doug has been instrumental in having P2P Lending company Zopa partner with CUs to offer NCUA-insured loans and investments.

P2P Lending launches in Canada

February 13, 2008

P2P Lending has been in Great Britain since 2005 in the form of Zopa. Prosper launched a year later in the U.S., followed by Lending Club, Circle Lending/Virgin Money, and Zopa in the US. I’ve checked in with Prosper from time to time, and as I’ve reported before, it’s growing at an astonishing rate.

Now, William Azaroff of Vancity CU and Jim Bruene of NetBanker report that today IOU Central has launched, giving Canada its first forum for P2P Lending.

Rock and Roll, Baby!

February 6, 2008

Ron Shevlin, Ben Rogers, and Tim McAlpine are writing about P2P lending. For those new to the P2P lending concept, know that it is already well-established, and growing rapidly. I will repeat: If Prosper keeps on its current pace of membership growth, by the fourth quarter of this year, it will have a membership north of one million people. That would make it the third largest credit union in the United States, if it were a credit union. This is happening NOW. I will write more about why P2P lending is so powerful, and what Zopa needs to do to have a chance against the Prosper juggernaut in a future post. But now I turn to rock and roll.

It’s time for credit unions to stop playing copycat and come up with completely new avenues of awareness and revenue generation. As Tim mentioned in his post, in the music world disrupted by sharing technology available to the millions of people, innovation came in the form of iTunes, Rhapsody, etc. Did you know that iTunes has sold 4 BILLION songs? At 99 cents per song, you do the math on total sales. I don’t know how much money the record studios ever made, but I’m guessing Apple would have a seat at the table at the least.

However, we don’t need another iTunes. Wal-Mart tried to copy with a lower price competition, and that effort has failed to put a dent in the Apple behemoth. What credit unions need to do is invent the financial equivalent of the video game Rock Band. Did you know that 2.5 million add-on songs were sold in the first 8 weeks of the games release? That’s double platinum, baby! This is a classic example of a razor and blade business model. And in this case, the razor isn’t even being given away for free, it’s at a reasonable price. (Side note – I recently learned that Guitar Hero and Rock Band come out of research into better learning methods at MIT’s Media Lab.)

Because of the runaway success of Rock Band, real bands are now clamoring to get their songs included. Not only for the notoriety, but I would wager that sales of included songs are significantly increasing. I just bought a great song (I’m So Sick by Flyleaf) from iTunes last night that I was not aware of until playing it in Rock Band.

Let’s find the financial services equivalent of this new phenomenon. We have all the ingredients. We just need a new recipe. Srsly.

Offering banking text messag… errr, nevermind.

October 19, 2007

In July, I wrote about what I would like to have as banking or credit union consumer… the ability to text message my bank or credit union with “balance” and get my current account balance sent back to my cell phone. I figured it might be one or two years before my credit union offered it. One executive of a 55,000 member credit union said he doesn’t see a need for it, his members are not asking for it. (Note to CU executive: How are you not seeing the MILLIONS of cell phones used by EVERYONE around you? Who doesn’t have a cell phone at this point?)

But now I realize that banks and credit unions are perfectly fine not offering it. Because the new generation of Personal Financial Management (PFM) sites (Wesabe, Mint, Geezeo) will do the job nicely on your credit union or bank account, bypassing the financial institution entirely. So credit unions and banks, sit back, relax, and let the new generation do it for you. No problem. I’ve already signed up on Geezeo, and I may check out Wesabe and Mint just to find out the differences between these online PFMs. It took me all of five minutes to sign up on Geezeo and verify my cell phone for text messaging balances, and I never had to leave my home. Future blog post: Why PFMs will soon rule the world. (Quicken and MS Money are now officially 15-minutes ago.)

And if you don’t think that online PFMs are going to take off and skyrocket, that’s probably what you thought about P2P lending… who would ever do that? Just look at Prosper’s growth rate… at the current rate, in one year, Prosper’s membership will make them larger than the third largest CU in the nation. And that’s in only their first 2.5 years of existence.

Prosper adds community page

June 14, 2007

Since its launch in February of 2006, Prosper has been about people-to-people lending. No middleman. Prosper is the eBay of lending. Prosper empowers individuals by letting them tell their personal stories.

Lately, Prosper has been growing at a rapid rate. Prosper has grown from $57 million in loans, and 270,000 members in May to $66 million in loans and 310,000 members as of June. That’s $9 million in loans and 40,000 new members in one month. That’s about 15% growth per month. If this pace keeps up, in one year, they will have more than $330 million in loans and 1,400,000 members.

Prosper has added yet another powerful feature: a Community page, where people can share their Prosper success stories, and why they use and like Prosper. Here’s one person’s story.

Prosper is a juggernaut that is picking up steam. Rapidly.

Earthquake rocks financial industry

February 11, 2006

Did you feel the earth change on Monday, February 6, 2006? Feel the tremors?

As of this date, the financial world has been forever changed. The world of borrowing and lending has now been transformed by the power of the internet, the power of peer-to-peer networking, upon which companies like eBay and Napster have been wildly successful. (Napster counted 60 million users at its peak).

Zopa is a peer-to-peer lending network in the U.K that has existed for a little while now. They want to someday have a U.S. presence. Well, another company has beaten them to it.

There is now a U.S. based internet peer-to-peer lending network: Prosper.

And they even have Groups that look eerily like credit union’s original field of memberships or SEGs. People are already talking about the pros and cons of Prosper.

What does this mean for credit unions? Time will tell. One thing is for sure: technology has fundamentally changed the way the entire world works over the past ten years. This new peer-to-peer technology, now applied to the financial industry, has the power to transform borrowing and saving forever. Zopa, and now Propser, have in a certain sense, snuck in the back door. While credit unions have been focused on growth and offering more services, a non-credit union company has come in to fill the void left by credit unions taking their eye off their fundamental reason for being: pooling savings to make loans to people with a common bond. Why didn’t a credit union develop this new Prosper-type network? It is because they were too busy trying to compete with banks and become more bank-like? Or too internally focused to take the time to figure out a way to use the internet to create a radically new way of doing business?

Today is T + 5 days and counting.

So that’s the bad news for credit unions. Is there any good news? The good news is that there is still something to be said for face-to-face transactions, no matter whether you are a borrower or a saver. There is still a certain degree of security knowing that professionals are handling your money and screening borrowers (if you are a saver), and that you can talk to someone and explain yourself if you are a borrower. Not to mention that your money is backed by the full faith of the United States government. There is still opportunity for smart, savvy companies to find their own unique niche in the marketplace. If you are a credit union, have you found your niche yet? Do you have an unbreakable emotional connection with your best members?

Thanks to Trey Reeme’s Open Source CU blog for making me aware of the launch of Prosper.