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!!!
Comments
hi,
non- indian sites have some great ideas- loved the peer-2-peer lending idea at prosper.com
liked the zopa site very much.
india too has couple of them. may not be very tech intensive (and of course - they disclose so much info to all banks that you have the entire banking industry after your head ; but that is what they are designed for- to get the best rate to us consumers); but they do serve the purpose.
www.apnaloan.com/
http://www.paisawaisa.com/
http://www.deal4loans.com/
www.indianpropertyloans.com
banks also have the facility of scanning for eligibility and request to revert back
are you guys the architects of both the sites and many more?
need to interface with it and see the functionality sometime
great story- tickled the grey cells and now need to merge banking and retailing to see what more apllications can come out
Posted by: prasad | January 29, 2010 04:09 AM
Seems to be nice idea of providing banking instruments in a market place. There would definitely lot of legal angles involved into it. Seems to have going the old days of lending in which a person lending money to another person based on trust however the difference over here would be based on certain agreements
Posted by: Manish | January 29, 2010 04:58 AM
Rituraj,
ebay actually has its own marketplace for the very same purpose of Microloans and Micro-finance. Check out - https://www.microplace.com
There are other nonprofit organizations which are trying this...Kiva.org is one of them...of course, being non-profit they don't have a sophisticated tech infrastructure as Prosper...
Posted by: Rockey Nebhwani | January 30, 2010 10:33 PM
Came across today a site trying the same concept in China - http://www.qifang.cn/index.htm
Posted by: Rockey Nebhwani | January 31, 2010 10:07 PM
Hi Prasad,
Thank you for your interesting comments. The sites that you have mentioned are not marketplaces but mostly a one-stop-shop for the consumer providing a wide array of banking products in a single online location. Going forward, it would be interesting to see if the banks themselves or any of the sites you mentioned provides a platform where you and me can also become a lender by setting up our own T&C. Some of the leading Indian banks with full proof security measures for online banking can definitely venture out to such innovative ideas.
Posted by: Rrituraj Sharma | January 31, 2010 11:49 PM
Hi Manish,
I agree. Legal formalities would be there and would differ from country to country. But the concept when implemented can provide so much choice to the consumer - both as a lender as well as a borrower.
Posted by: Rrituraj Sharma | January 31, 2010 11:56 PM
Hi Rockey,
Qifang is a good discovery - the punch line says 'First Chinese Online Student loan community.'Though the set of borrowers are only students but it has the basic principles of a market place.
And you are right about microplace and kiva - marketplaces with a social responsibility. Very interesting implementations indeed. Specially the 'as low as $20 investment' in microplace can drive many small investors with a socially responsible demeanour to participate here.
Posted by: Rrituraj Sharma | February 1, 2010 12:44 PM
Thats quite a thought. Its interesting to see how I can lend whatever small amount of money I have. We have all seen sites that provide contacts to the concerned banks, but no actual transactions take place.
Good article and am waiting for more! :)
Posted by: Kashyap | February 2, 2010 04:48 AM
Nice article Rritu, but i wonder if this has any legal implications from the perspective of an Indian market. For e.g to lend money individuals need sign up on legal documents. Also when we lend money there would be Income tax implications on the short term capital gains earned as part of the interest. If the market-place can factor in the legalities that would certainly help the users of such a market place. Overall a wonderful thought.
Posted by: Sanjeev Kulkarni | March 5, 2010 05:52 PM