Crowdlending and the banks of the future

back to the future dashboard

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When it comes to crowdlending or peer to peer finance, there is lots of talk about alternative finance, or new finance.  For the time being, that’s exactly what peer to business lending is – a new way of lending and borrowing money.  But what does the future hold?  Is it simply a flash in the plan or is crowdlending part of a wider disruption to the financial status quo that will change the face of banking and finance forever?

Brett King certainly thinks that the entire financial sector is ripe for some serious change.  He’s the man behind movenbank, a new entrant in the US who claim not to be “your typical bank” and who are setting out to launch “a banking experience that is fair, fresh, fast and maybe even fun:)”.

Amongst other things, movenbank are promising:

  • No hidden fees – placing transparency centre stage
  • No plastic – they believe that the future of payments lies with mobile phones and mobile wallets, after all, “when was the last time you were able to see your current account balance on your plastic card?”
  • No paper – application forms, statements and recepits will be online.

He’s also the author of Bank 2.0 and now the newly published Bank 3.0.

We’ll be reporting back on Bank 3.0 once our new copy has winged its way to FundingKnight towers but in the meantime, here’s a snippet from Bank 2.0 that explains better than most why technology and innovation are guaranteed to change the way we live… and bank.

How long do you think it took Facebook to attract 50 million users?  The answer’s not long… in the time that’s elapsed since their launch back in 2004, Facebook has amassed more than 500 million users, rather dwarfing the 50 million users that has historically been considered the point at which something ‘goes mass market’.

It used to be the case that new ideas or new products took time to bed in and become popular.  Now, the speed of technological change and development, coupled with the global connectivity of social networks means that things get adopted into daily life far more quickly.

It took over 70 years for aeroplanes to become a mass market commodity, but now innovations such as the iPod or Facebook reach critical mass almost in the blink of an eye.

Why will that change the way we lend and borrow money?

Well, because it can do nothing but change it.

By 2020 all customers will have grown up being “digital natives” well used to social networking and online transactions.  Already customers value mobile capability and online security and already people expect more personalized, more valuable communications from brands than they used to get from large mass advertising campaign on TV or billboards.

Banking has got to change from a one size fits all (unless you are extremely wealthy) model to a state where customers feel like they are genuine participants in their own financial futures and can make well informed, individual decisions rather than being shoehorned into products that don’t’ speak to their personal circumstances.

Mainstream banks used to see online banking as a way to cut costs and move customers to remote channels… now that couldn’t be further from the reality of what online finance means.

Rather than put space between a brand and its customers, online finance makes it easier to communicate and faster to do business.

Rather than hive customers off into remote channels, online finance provides better value for customers and new ways of doing everything from personal banking to foreign exchange.

Rather than keeping customers apart, it has brought them together in one big global network that can share opinions and provoke customer groundswell in an instant.

New finance is already here, in the guise of new high street banks like Metro Bank, in new entrants like The Currency Cloud who offer low cost, cross border payments and in the new wave of peer to business lenders like FuningKnight, Funding Circle or Thin Cats.

Whether or not such innovations have a long term place in finance is pretty much decided, the bigger question that we will have to wait to understand is just how mainstream banks will make the shift to a new financial order.

After all, as Brett King points out, “The future, in may ways, has already begun.  The only question remaining is how you will make the journey?”

Want to read more about new finance or financial innovation?  Try out some more posts from the FundingKnight blog that we’ve picked out below or, to start you own new finance journey why not sign up to become a FundingKnight lender?  There’s no pressure to lend and no fees if you do… so what’s stopping you taking the next step of your own financial journey?

 

Crowdlending, crowdfunding and what will happen to bank lending?

 

Crowdlending: Just one part of a sharing economy

 

Business finance: A load of shylocks or simply a sector dying to change

 

New finance is the future… FundingKnight makes the Huffington Post

Business finance: A load of shylocks or simply a sector dying to change

street sign for 'Change Alley'

I read an interesting article this week from Nasir Zubairi, Head of Product Marketing at the Currency Cloud.  His post, Selfish Shylocks, published via the Huffington Post, takes a look at the state of innovation – in general – and the lack of innovation – specifically – in the banking sector.

He makes some really good points, explaining that:

  • Innovation improves the status quo and substantially alters it
  • Innovation focuses on making things better for customers

But he also laments the fact that, in general, UK banks have a. forgotten to share the benefits of innovation with their customers and b. tried to avoid any sort of innovation that promotes anything other than higher profits.

In seeking to explain why the big banks get away with it, Zubairi quotes the stark statistics that prove how remarkably un-elastic customers are when it comes to financial services.  “Out of 64 million bank accounts in the UK”, he tells us that “less than 0.1% have voted with their feet and shifted banking provider in the four years to the end of 2011.  Even then the likelihood is that the switch was to one of the other three big banks.”

The rest of the article rightly applauds some of those at the frontier of new finance.  I agree that new entrants such as Bank Simple, Holvi, Movenbank and The Currency Cloud represent the future of finance but it’s probably also worth asking why now? What needs to change?  What will make people vote with their feet?  Why will things ever be different?

And to answer those questions, I’d add another point to those above describing innovation.

Innovation frequently happens when developments in products or services coincide with some bigger, more important change in the way we collectively live our lives.

The i-pod didn’t create digital music.  The i-phone didn’t invent the smartphone.  Rather they are examples of great product design that came along at just the right moment to capture the public imagination.

It might seem ridiculous to think that something similar could happen to the banking industry, to a sector characterised by complexity and – let’s be honest – boredom.

But, honestly, I really do think something is starting to happen.

Over the summer, I read a book by Harvard professor Youngme Moon called Different. Escaping the Competitive Herd. Standing out in a world where conformity reigns but exceptions rule.

 

Apart from being amused by the very length of that title, I was struck by how relevant the last bit is to what new finance is trying to achieve.

“Standing out in a world where conformity reigns but exceptions rule”

Surely, that sums up where new finance is at right now?

Moon makes some fantastic observations about why the time for change is now, and has already begun.  She notes that many “businesses have forgotten the point of it all – which is to create meaningful and compelling product offerings.”

So can banking – lending or borrowing money – be meaningful?

Yes.

I’ve already explained why I think new finance is more than simply a romantic notion and I wholeheartedly agree with Moon that the global recession has set the wheels of change in motion; “the storm (has) refocused us all in some collective way… even those who were financially secure have begun rethinking their most basic consumption patterns… the age of abundance is over. Not because things are no longer abundant, but because abundance has lost its status as our reigning aspiration.”

So, new finance.  Innovative?  Yes.  Meaningful?  Yes.  Poised to take advantage of being in the right place at the right time?  I hope so.

Creative commons photo source

New finance is the future…. FundingKnight makes the Huffington Post

Just a short post today to direct your attention to Nasir Zubairi’s latest article on new finance for the Huffington Post.

It’s a well thought out piece, and of course we’re glad to be mentioned in the future of new finance.

Concluding that we can’t wait for our ailing banking system to recover, he writes:

We can do better. The alternatives are already here and innovation in the New Finance sector is progressing at a lightening pace. Entirely new banking models such as Fidor Bank in Germany, Holvi in Finland and Simple and Movenbank in the US will soon migrate to the UK. There are already several young firms focusing on niche elements of financial services to deliver exceptional, transparent and cheaper services to SMEs and consumers. There are firms providing Peer to Peer based access to credit, such as Fundingcircle, Zopa and Fundingknight, other firms providing lower cost access to currency and international trade services, such as Tradeshift, Currencyfair, Transferwise and The Currency Cloud.

Like Currency Cloud, who’ve just won new funding to continue changing the world of forex and international payments for small businesses,we’re ready to start writing the future.

At the end of his post Nasir writes, “New Finance is the future we must embrace”.

Well, we’re ready…. are you?