Short Summary of last week posting (Part 1): A new generation of Peer-to-Peer (or Citizen-) Banking web sites appear to attract enough attention of the public. Should traditional bankers worry?
Part 2
Is it possible that the incumbent banks will share the fait of the travel agencies, music industry, telephone operators and the newspaper classified adds who experienced a sudden and substantial loss of business to online competitors before they even understand what’s going on? The scenario is not unlikely at all; the past experiences has shown that many of the revolutionary Internet ideas tend to expand as a virtual pandemic after reaching a users’ critical mass. Take the examples of SecondLife, Google, Wikipedia, MySpace, Digg, Flickr, Skype and YouTube to name some of the familiar names. These are brands that have attracted millions of followers in very short time and without any promotion. I dare to predict that the same will happen with the Peer-to-Peer (P2P) banking sites, provided that they reach the critical mass of users that will put them in the radar of giants like Google, eBay, Yahoo or Microsoft (and why not of Amazone or WallMart) who constantly look for interesting ways to expand their online business. Experience from recent high-profile acquisitions of Internet businesses points to the fact that the industry giants have no problem spending billions of dollars in order to further strengthen their online position and expand their market reach. Having said that it is not so difficult to imagine what will happen if Google or Yahoo add zapa.com, Boober.nl or any other similar online Peer-to-Peer bank to their assortment: from small and local these names will become overnight big and global and most probably fierce direct competitors of the traditional banking by offering to hundreds of millions web users an interesting virtual banking alternative. The worst case scenario for the traditional bankers is that most probably the citizen banks will expand their assortment to more categories of financial services and products. Do banking CEOs and strategists need to worry? After all banking is not like every other industry since reliance (based on personal contact and interaction) is a core banking value that the Internet cannot provide. Moreover banking is an economic activity meticulously regulated and followed by governments and financial authorities. Can these and other possible problems stand in the way of citizen banks? Again looking to the Internet history I would argue that online concepts embraced by users develop their own momentum and can expand beyond the reach and control of industries, governments or any kind of watchdogs.The important question to my opinion is whether the banking world has noticed these developments and has given any thought to this threat, provided that they consider this as a threat at all. One would expect that guided by past experience banking executives and strategists should seriously consider making the first step, ahead of the Internet giants. The online P2P banks are still cheap and therefore easy to acquire, while the risks are relatively low.Will the banking world try to preempt? Looking again to the past this sounds very unlikely. Experience shows that incumbents are very slow to react to the fast and often uncontrollable developments in the cyberspace. If this is the case here, it is interesting to wait for the next chapter of the Online Citizen Banking story
