Sometimes, (often?) I have ideas for products / ventures outside of my field of interest. Since I do not plan on executing them, I thought I might as well give them away here for free. No guarantee that they will always be great but you’ll never know. I’ll call this new category: Ich’sights
I was sitting in the plane yesterday next to the CEO of a fairly big auto parts manufacturer. As we were discussing a bit about the state of the economy these days and how his business was faring, he lamented on the lack of cash and how difficult today to obtain a loan of 1/10 of what he used to obtain 18 months ago without the bank blinking.
I was reflecting on this yesterday and was thinking how much cash had become a scarce commodity these days. Well, if banks are not willing to lend and if consumers are distrustful of banks, let the consumers be the bank.
Yep, even though it has been tried a bit in the past, I think that the timing could be right for a citizen-owned banking system. In other words, a bank operated by people like you and me.
The way it could work: just a matchmaking website connecting users with extra cash with other users / entities needing the money with risk profiles and risk aversion filtering mechanisms. For example, I have 10K in cash, and I want to make more than 3% of it, I browse through the list of profiles/ projects and may end up putting 3k in a project requiring 100K, with an interest rate of 8%, with some level of risk, acceptable for me. You get the gist of it…
Why would it work today if it did not before? 2 reasons: timing and mood are right. Plus the argument that only bankers can assess risk, is not relevant anymore: first they have shown that they do not know more than I do and second, as shareholders / owners of most institution thanks to the bailout we ARE bankers already. Didn’t you know it?
Comments ARE free…
Filed under: business, thoughts | Tagged: bailout, Banking, Business Idea, Consumer Lending, LinkedIn, Venture
Like this :
http://uk.zopa.com/ZopaWeb/
See you in “La Cave”
Indeed. Cheers, Romain
Let me know if find a way to improve on Prosper’s model! The founder spoke at Stanford in 2006 very interesting! Here is the link:
http://edcorner.stanford.edu/authorMaterialInfo.html?mid=1576
P
Hi Pablo. Good catch. There is also Zopa, Eloan etc. I discovered that there is even a name for this industry : it’s called peer to peer lending.
I am not very familar with Prosper, nor with the industry but based on quick research, it looks like they were catering to higher risk profiles. Plus there business model seems a bit unclear to me as it looks like they take a one time-fee per loan, regardless of its being reimbursed or not. While I understand the logic here, in this industry you may want to consider having more skin in the game.
I guess my point in this post was that the timing could be right to cater to lower risk profiles and make money out of such a website. In a nutshell, I would assume that they key success factors for such a site would be: scale, risk model and price / cost leadership (the overall fees can be cheaper to that of a traditional bank due to smaller operations), I tend to believe that the current trends mentioned in the post could facilitate attracting more consumers with lower risk profiles (it looks like the bulk of users of Prosperhad pretty risky profiles) and reach scale, hence catering to two out of the three aforementioned success factors, hence making the model more attractive today. In other words, since banks are not lending anymore, the perception of such ventures could move from being a second rate alternative to something more mainstream hence catering to the general public instead of solely riskier profiles. Just assumptions…
Let me know if you find more. I hope that helps.
Cheers,
Romain