Building upon the discussions about personalisation and virtualisation, these are important. In fact, as I’ve mentioned before, personalised, virtualised in real-time on my mobile is PFM-squared (does any of that last sentence make any sense?).
So then I was recently asked to address a conference with a mix of banks from all sectors, and to give examples of innovation in each of these different banking sectors.
The examples I picked had one common theme: social finance.
I started with thinking about payments innovation at a P2P level, of which there are many: iZettle, PayaTrader, mPowa, SumUp, PayLeven, Go Payment (from Intuit), Square and PayPal.
Then looking at banking in a more general space there are many other examples including Moven, Simple, Alior and Fidor, as well as many other specific areas being addressed in:
- P2P Lending and P2P Saving (Zopa, Ratesetter, Smava, Prosper, Boober, Smava, Lending Club, Ratesetter, Cashare, Loanio …),
- P2P insurance (German firm Friendsurance seems to be first in this space)
- Payday Lending (Wonga, Cash America, Advance America, et al),
- Goalsetting and gamification (SmartyPig is the main player in this space),
- Crowdfunding (Funding Circle, Kickstarter, Indiegogo, crowdrise, razoo …),
These are all person-to-person, peer-to-peer and as soon as you make those connections, you are social.
Then I thought about wealth management and investment markets, and firms such as Stocktwits, eToro and Nutmeg immediately came to mind. All of these new guys are using social media to leverage knowledge to improve returns.
Finally, the commercial banking markets with transaction banking are also being disrupted by everything from bitcoin to crowdfunding and more. It goes further than this though, with Asset Based Finance platforms such as Market Invoice, Platform Black, the Receivables Exchange and Urica offering their receivables for financing online.
The latter areas were the focus of a UK government report in 2012 on boosting finance for business.
In fact, the UK government is actively encouraging new forms of finance. As the Independent reports, the UK government announced in December that four peer-to-peer lenders will be given a total of £55 million in taxpayers' money, an amount to be matched from private sources. The £110 million fund is part of the £1.5 billion Business Finance Partnership, part of the UK Government's drive to diversify sources of finance to business.
In this context, P2P lender Zopa has lent £250 million since being founded in 2005, while Funding Circle has lent £66 million. Crowdcube, the crowd-funding website, has lent £4.5 million since being set up in 2010 and has 25,000 registered investors. In total it is estimated the peer-to-peer industry has already advanced £300 milllion to individuals and small businesses this year, and some economists believe that up to £30 billion could be raised from the public for alternative methods of financing such as crowdfunding.
The sector’s lending and borrowing activities are now overseen by the UK's new market regulator, the Financial Conduct Authority, and there is an industry trade body, the Peer-to-Peer Finance Association.
And so we see these fledgling new models of finance rapidly evolving into more formal and mainstream markets. In fact, some of these markets may even replace our traditional structures. As Andy Haldane, Director for Financial Stability at the Bank of England stated in December 2012: “the mono-banking culture we have had since the 1990s is on its way out. Instead, we are seeing a much more diverse eco-system emerging with the growth of new non-bank groups offering peer-to peer lending and crowdfunding which are operating directly with a wider public.”
This shows that the socialisation of finance, augmented by personalisation, virtualisation and gamification, has already transformed the world of money today.