Personal Finance On-line: New Models & Opportunities
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Strategic review of emerging on-line personal finance offerings, based on changing consumer perceptions of the value and credibility of traditional finance service providers. Considers social lending, micro-credit, and peer-to-peer lending, in combination with prediction markets, as a new personal finance ecosystem. Explores service concepts and describes experience scenarios with the goal of finding opportunities for existing finance providers to engage with new models.
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Personal Finance On-line: New Models & Opportunities
- 1. New Models For Personal Finance Service Concepts & Scenarios
- 2. Methodology Envisioning a Portfolio of Options & Concepts
- 3. Creating & Refining Strategic Options Customer Insights Starting Point Map Ecosystems Vision Scenarios Generate Experience Evaluate Experience Concepts Concepts
- 4. Connecting Vision to Execution Vision Planning Execution Insight & Define projects Execute projects Discovery Set budgets & Monitor outcomes Generate options timelines Maintain roadmap Evaluate options Create roadmap Define vision
- 5. Customer Outlook (Financial Services) A Crisis of Confidence
- 8. “The global economy will shrink this year for the first time since World War II” http://news.bbc.co.uk/2/hi/business/7931899.stm
- 9. "global growth below zero this year, the worst performance in most of our lifetimes..." http://news.bbc.co.uk/2/hi/business/7934405.stm
- 11. 71% "most people on Wall Street would be willing to break think the law"
- 12. "in general people 26% on Wall Street are as honest and moral as other believe people"
- 13. Disintermediation Business Impact & Customer Responses
- 14. “There is a significant loss of confidence with banks right now. People are turning to whatever communities they think are best able to serve them.” Gartner Research
- 15. “Visits to online personal finance sites are up threefold over last year”
- 16. Micro-credit Peer 2 Peer Prediction Markets
- 17. “Because of the crisis, I actually felt more comfortable than if this were some big bank.” “This Web site makes me feel safer.” Holli Banks, SmartyPig Customer
- 18. New loan originations are up about 40% over year-ago levels
- 19. “By eliminating the traditional bank as the middleman, consumers can now get better interest rates than with banks or credit card companies.”
- 28. Finance Landscape Existing Offerings & Opportunities
- 29. Balanced Offerings Satisfying business goals provides value for the business Meeting user needs provides value for customers Business Balance is essential for success: business objectives objectives and user needs must provide shared & context value Unbalanced offerings fail! Value User needs & context Business objective Business objective Business objective User User User needs needs needs
- 30. Current Offerings Size Commercial / Sovereign Services Small Entity? Biz, Gov, Non-profit Private Banking SFO Personal? Complexity
- 31. Personal finance Small entities (business, government, non-profit)
- 32. Finance Value Equation Existing offerings: Existing services for large Offerings customers. Value What about Customer smaller Needs customers?
- 33. Underserved Market Segment Size Commercial / Sovereign Small Entity Biz, Gov, Non-profit Private Banking SFO Personal Complexity
- 34. Emerging Offerings Size Commercial / Sovereign P2P, Micro-finance Private Banking Social lending? SFO Complexity
- 35. Service Concepts
- 36. Micro-credit Shifts & Enabling Factors • New populations (emerging market) incorporated into global financial system • Financial instruments available to many more people • Broader participation in financial / lending system • Lending becomes social, political, Future Experience • Micro-credit system directly connects people across national, cultural, geographical barriers • Small transactions formalized & legitimized • People can generate goodwill & personal connections by lending Traditional players can provide platform, services.
- 37. P2P Finance Shifts & Enabling Factors • Disintermediation of traditional lenders for small loans • Increase in range of lending/borrowing options available • Lending / borrowing localized in relation to different axes - no longer place / purpose Future Experience • Lending / borrowing may no longer controlled and centralized by banks / other traditional lenders. • Peer and personal finance = transparent - ratings and histories available on all parties • All parties rely on distributed services & finance ecosystem: ratings, contracts, mediation, communication, etc. Traditional players can provide platform, services.
- 38. Prediction Markets Shifts & Enabling Factors • Growing acceptance of prediction markets for wider contexts; smaller enterprises; public policy, politics, finance, entertainment. • People use prediction markets for individual goals, within individual contexts. Future Experience • Personal / group financial decisions can be vetted by experts using cheaply available collective intelligence tools. • Prediction markets introduce collective intelligence into financial planning for individuals and small enterprises. Traditional players can provide platform, services.
- 40. Customer Experience Scenarios 1. Personal finance 2. Small business 3. Network finance
- 41. Simon: Small Business Simon owns a bakery and dessert shop. He wants to sell a new kind of chocolate candy for the holidays. He needs a machine to make the new kind of candy. The bakery has steady revenue, but Simon needs a loan to buy the machine. 1. Simon hears about P2P lending for small businesses. 2. Simon checks the ratings of several lending networks focused on small businesses. 3. Simon compares their terms with loan terms from a bank. 4. The P2P network offers better terms! 5. Simon joins the network, and requests a loan.
- 42. Simon: Small Business • The lending network compares Simonʼs request to the results of similar requests, reviews Simonʼs credit scores and reputation, and creates a prediction profile. • The lending network publishes the profile to a prediction market focused on small business investment. • The prediction market judges Simon will make enough money to repay a loan, if the new chocolates sell well. • The lending networkʼs sends the prediction profile, and judgement to a network of capital management advisors. • These advisors recommend Simon lease a machine for six months, to test sales.
- 43. Simon: Small Business • The lending network shares the judgement and advice with Simon, who agrees with the recommendation. • The lending network opens a loan for the amount required to lease. • Lending network members fund the loan based on Simonʼs data, and the prediction marketʼs judgements, and the advisory report. • Simon leases the chocolate machine for his bakery • The chocolates sell well, and Simon repays his loan early, earning good reputation points within the lending network.
- 44. What Should Traditional Actors Do?
- 46. New Models Traditional Offerings
- 48. Mutual Consumer Fund Loans
- 49. Mutual Consumer traditional Fund Loans
- 50. Mutual Consumer traditional { Fund Loans
- 51. Mutual Consumer traditional { Fund Loans Social Lending
- 52. Mutual Consumer traditional { Fund Loans new Social Lending
- 53. Mutual Consumer traditional { Fund Loans new { Social Lending
- 54. Services Platform Auditing Delivery Accounting Cash mgmt Asset mgmt Investing Pensions Direct Financing Delivery Risk mgmt Personal finance Corporate finance Factoring
- 55. New Ecosystem Traditional Actor
- 56. New Ecosystem Service Traditional Actor
- 57. New Ecosystem Service Traditional Actor Service
- 58. New Ecosystem Service Traditional Actor Service
- 59. New Ecosystem Service Traditional Actor Service Social Lending network
- 60. New Ecosystem Prediction Market Service Traditional Actor Service Social Lending network
- 61. New Ecosystem P2P Borrowing network Prediction Market Service Traditional Actor Service Social Lending network
- 62. New Ecosystem P2P Borrowing network Prediction Market Service Traditional Actor Service Social Lending network
- 63. New Ecosystem P2P Borrowing network Prediction Market Service Traditional Actor Service Social Lending network Prediction Market
- 64. New Ecosystem P2P Borrowing network Prediction Market Service Traditional Actor Service Social Lending network Prediction Market
- 65. New Ecosystem P2P Borrowing network Prediction Market Service Traditional Actor Service Social Lending network Prediction Market
- 66. New Ecosystem P2P Borrowing network Prediction Market Service Traditional Actor Service Social Lending network Prediction Market
- 67. New Ecosystem P2P Borrowing network Prediction Market Service Traditional Actor Service Social Lending network Prediction Market
- 68. New Ecosystem P2P Borrowing network Prediction Market Service Traditional Actor Service Social Lending network Prediction Market
- 69. New Ecosystem P2P Borrowing network Prediction Market Service Traditional Actor Service Social Lending network Prediction Market
- 70. New Ecosystem P2P Borrowing network Prediction Market Service Traditional Actor Service Social Lending network Prediction Market
- 71. Appendix
Notas do Editor
- http://www.flickr.com/photos/mugley/3470549842/
- Main Street vs. Wall Street by Jack Loechner A new survey of American consumer attitudes to Wall Street by The Harris Poll of 1,010 adults surveyed between February 10 and 15, 2009 http://www.mediapost.com/publications/?fa=Articles.showArticle&art_aid=101756
- Main Street vs. Wall Street by Jack Loechner A new survey of American consumer attitudes to Wall Street by The Harris Poll of 1,010 adults surveyed between February 10 and 15, 2009 http://www.mediapost.com/publications/?fa=Articles.showArticle&art_aid=101756
- Lose Confidence in Your Bank? Turn to the Web By CLAIRE CAIN MILLER Published: December 19, 2008 http://www.nytimes.com/2008/12/20/your-money/20mint.html
- Lose Confidence in Your Bank? Turn to the Web By CLAIRE CAIN MILLER Published: December 19, 2008 http://www.nytimes.com/2008/12/20/your-money/20mint.html , said Jim Bruene, founder of the trade publisher Online Financial Innovations, and many of the sites say they have grown quickly since the crisis worsened in September.
- The principles of microcredit have also been applied in attempting to address several non-poverty-related issues. Among these, multiple Internet-based organizations have developed platforms that facilitate a modified form of peer-to-peer lending where a loan is not made in the form of a single, direct loan, but as the aggregation of a number of smaller loans—often at a negligible interest rate. There are several ways by which the general public can participate in alleviating poverty using Web platforms.
- “Because of the crisis, I actually felt more comfortable than if this were some big bank,” Ms. Buck said. “With everything that’s going on with banks, I’m not ready to give them my money. This Web site makes me feel safer.” http://www.nytimes.com/2008/12/20/your-money/20mint.html
- January 22, 2009, 2:36 PM ET Peer-to-Peer Lending Refuses to Die http://blogs.wsj.com/wallet/2009/01/22/peer-to-peer-lending-refuses-to-die/ But there are signs of life. Lending Club, which recently registered with the SEC to create a secondary market for its loans, has been signing up twice as many lenders each week than it was last spring, and new loan originations are up about 40% over year-ago levels, says Renaud Laplanche, Lending Club’s founder and chief executive.
- http://pertuitydirect.com/docs/launch_press_release.pdf Pertuity Direct Launches Next Generation Social Finance Platform Company Brings Together the Advantages of Capital Markets, Social Networking and Traditional Banking Pertuity Direct Launches Financial Mashup: Consumer Loans + Mutual Funds + Social Finance By Jim Bruene on February 15, 2009 12:43 PM Overview Pertuity Direct is an amalgamation of two financial services plus a social lending community: * Mutual fund: Retail investment assets are gathered via the National Retail Fund, an interval mutual fund created by Gemini Fund Services. The fund plans to invest primarily in consumer loans originated by Pertuity Direct (see note 1). At the outset, there are two mutual funds to choose from: one will invest only in loans to prime customers with credit scores of 720 or higher; the other will take on more risk and invest in loans to borrowers with 660 or higher scores. Minimum investment is $250 and current estimated fund expenses are 3.1%. * Consumer loans: Three-year installment loans of $1,000 to $25,000 will be originated by Pertuity Direct under state licensure. The loans will be sold to The National Retail Fund who will hold them until they pay off. Pertuity Direct will be paid a 1% servicing fee from the fund. Borrowers also pay a 1% to 2% loan fee at funding. The company is currently licensed in 37 states. Social lending: The last, and least, piece of the product is a social lending forum, where mutual fund investors can purchase Pertuity Bucks to give to already-funded borrowers to help them repay their loans.
- Peer-to-Peer Banking (Business 2.0) By Rebecca Jarvis August 1, 2005 The service is open to any U.K. resident over 18 who clears a credit check. Each borrower is assigned to one of two categories: market A for people with solid credit, and market B for riskier borrowers, who pay higher rates. To dampen the effect of defaults, Zopa spreads each user's cash among at least 50 customers. The payoff for would-be J.P. Morgans? Their money works harder than it would in the best money-market accounts. Market A lenders can expect returns around 6 percent, while market B lenders get rates as high as 9 percent. Zopa, meanwhile, takes a 1 percent commission from every borrower's loan. http://money.cnn.com/magazines/business2/business2_archive/2005/08/01/8269646/index.htm
- MicroPlace.com, a wholly-owned subsidiary of eBay, was launched in October 2007. With Microplace, retail investors in the US can buy securities issued by security issuers. Therefore, MicroPlace is tapping into the socially responsible investment world and can attract larger capital to microcredit. Deutsche Bank estimates that $250 billion [7]is needed to raise enough capital to get it into the hands of the one billion working poor who could benefit from microcredit. While the US gave $303 billion [8] in charity to all causes, they invested $2.4 trillion in socially responsible investments. [9]
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