Power To The People

Who hates dealing with the bank? Your hand should be raised.

So, have you heard about Zopa? You can check out all the details on their site, but I think the potential for huge impact on our financial landscape is there. Think of Zopa as the paradigm shift for loaning money that Ebay was for buying and trading. You’ve got $12,000 sitting around? You can list your money (just like you would that guitar or camera you just sold on Ebay) at, say, 6% interest. Then Zopa can potentially connect you with a credit-worthy person who needs 12G, bypassing the often insane banking industry. Zopa has a whole tiered credit system for assigning pre-determined credit limits to users and you, as the loaner, can get higher returns on potentially high-risk borrowers or play it safe with low-risk borrowers. 

Where the paradigm shift can come in is two-fold… if Zopa takes off in America (it’s UK-based now) and reaches Ebay-sized proportions, banks no longer have a monopoly, which means they no longer have as much power, which means they might actually have to stop pushing people around and start doing a better job of customer service. That? HUGE. Secondly, what happens to the financial landscape when high-risk borrowers can actually get loans? Mr. Bad Credit (which is what, more than half of America?) can’t get a loan from his local bank, but Zopa can connect him with Mr. Money Bags, who’s more than willing to pimp out his 12G at a high interest rate. And, strangely enough, both people get what they want (assuming Mr. Bad Credit can pay up over the long run).

What happens if Zopa decentralizes the banking industry, at least from the borrower’s viewpoint? Don’t think it will happen? Backtrack to 1994 when no one thought there could be a world-wide marketplace before a little company called Ebay became the most popular shopping destination in the world, connecting MILLIONS of people who have stuff with MILLIONS of people who want stuff. Sounds like banks need to wake up and smell the internet before it eats them for lunch.