Could Facebook wipe out the banking industry?

Social networking site Facebook has the potential to wipe out the traditional banking industry by moving agressively into peer-to-peer lending, says Thomas Power, CEO of online business network ecademy.

With Facebook set to create a billion-strong social network by 2012, Power says the company has the potential to leverage its large user base and move into entirely new business territory.

"It starts with a Facebook piggy bank, payment system and credit card. Then it's a savings account and a loan perhaps for university. What about a mortgage, life insurance, health insurance, car insurance, house insurance and a pension?" asks Power.

Facebook is already looking to create its own currency with the launch of Facebook credits. But Power says the real opportunity may lie in the peer-to-peer lending model adopted by companies such as Zopa in the UK, and Prosper in the US.

"With a billion users and 10% choosing to bank with Facebook that's 100m customers," says Power. "Wouldn't that make Facebook one of the biggest retail banks in the world?"

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Comments: (5)

A Finextra member 15 March, 2010, 17:54

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In short, yes. It's a real possibility. Zopa have been hugely impressive and have proved that peer to peer lending can and does work.

The problem for the Financial Services industry, is that it is in a state of denial on the impact of Social Media. Whilst it agonises about the Retail Distribution Review and other regulatory issues, it's the Internet that is the real threat to the whole industry as consumers themselves increasingly start to hold the power.

Philip Calvert
www.ifalife.com

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Steve Ellis - Finextra Research - London 15 March, 2010, 19:08

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A scary prospect. For consumers as well as banks. Facebook hasn't the best record of managing simple opt in/opt out privacy settings, and many social network users are either confused or sloppy with their privacy settings.

Danah Boyd touches on these issues at - http://www.danah.org/papers/talks/2010/SXSW2010.html

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A Finextra member 15 March, 2010, 21:42

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Don't you just love the leader...'wipe out the traditional banking industry'? Yeah right! Let's put this into perspective...the 'banking industry' is more than just peer to peer payments and Facebook is, from a trust perspective, on a par with www.takeyourmoneyandrun.com and www.mafiaholdings.com. Why on earth would anyone want to place deposits with Facebook, for example. And, remember this...a bank is a regulated deposit taking institution! So for heavens' sake, get real and put this alongside Paypal! Oh! Will it 'wipe out the maybe not yet traditional Paypal industry' too?

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Simon Stannard - unspecified - unspecified 16 March, 2010, 09:19

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Shame! I was hoping to glide to the bank in my new flying car.

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Dushyant Balasubramani - Infosys Consulting India Limited - Bangalore 17 March, 2010, 06:49

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'Potential to wipe out the banking industry' would be an over optimist scenario. Consider this - Facebook has an user base of 8 Mn in India which is 10% of the wired population while India's internet penetration stands at 7% of its population. In this scenario, Facebook loses its relevance in the unwired part of the world. Banks have access to this world and this is unlikely to change in the near term.

Having said that, Zopa's success has shown us that the trust of the community can be built on the web and this should not remain an area of concern for Facebook. But what remains to be seen is whether Facebook can win the regulators in a cross-border scenario.

Dushyant