Banks and the Third Party Marketplace
Marketplace is the buzz word these days. Sears recently announced the launch of the Sears marketplace which was preceded by Walmart a couple of months back. Play.com, the Jersey based online retailer of music and electronic products also has its own third party marketplace where one can sell DVDs, CDs, Games, Books etc. And ofcourse we have Amazon and eBay which has been around for so many years now. No doubt this gives ample opportunity for everyone to sell and most importantly a wide and competitive choice for the consumers thus giving the right thrust to the Long Tail economics that Chris Anderson proposed a couple of years back. Talking about Long Tail, this is one thought that has been going around in my mind for sometime now. Marketplace has evolved in Retail as well as in the Entertainment space. What about Banking? Is a third party marketplace possible for the Banking industry as well? Can there be a one stop shop for consumers that would address all their banking needs? A marketplace where, not only banks, but individuals can come and sell customised banking products and other individuals come and buy them? Looks improbable ...
... but definitely not impossible. The Long Tail Theory talks about unlimited shelf space, primarily made possible by the internet because of which there has been a shift in the demand curve across products allowing Niches(the tail) to score rather than Hits.The Banking industry has also come a long way from brick and mortar setups to providing the convenience of the internet in a secured way to the customer. Though when it comes to money matters over the net, people arguably are skeptical and apprehensive, but when the trust builds up and the customer gets the assurance of secured transactions, a banking marketplace can definitely become a reality. A little research on google led to a couple of interesting sites in the UK and the US where banking marketplaces from lesser known brands are already up and doing business. Be it taking a loan for medical school, buying a bike, paying past bills or funding for wedding expenses, Zopa and Prosper have set up third party marketplaces where lenders out there are ready to provide you, the borrower, with the requisite money.
And just like an eBay or an Amazon, you can choose from a host of options that suit your needs in terms of the loan amount and the time of repayment. Anybody after fulfilling the basic criteria can become a lender and can list their products, set their own rates and successfully make their idle money work. Prosper even claims to have close to a million members and a business of $188 Mn so far.
This concept, if implemented by established banks, can be particularly interesting as because banks with their own established brand name can go a long way in building that trust amongst their customers (both borrowers & lenders) and provide an extended portfolio for the consumer to choose from. In the process, the bank can also generate revenue with other's products. This is true democratisation of production as well as utilising the benefit of unlimited shelf space as mentioned in the Long Tail theory. And when distribution of these products are facilitated through a marketplace, they will definitely sell.
Going forward, I will not be surprised if in the future a consumer says , 'Enough of fixed deposits, enough of riding the unpredictability of the stock markets, let me see how much disposable income I got which I can lend'. This can become one more channel for an individual to make their money work hard and give back handsome dividends. And it surely will not be long before you start thinking what to do with your extra cash. Well, you got 3 choices : Lock it, Invest it or Lend it!!!
