Innovation in the Crunch
Posted by Ben Milsom
I’m just back from a thoroughly interesting weekend at FooCamp - where I was given the opportunity to talk a bit with people about financial services in a post-crunch world. I had some fascinating conversations and met some amazing people - you can check out some of the blog coverage here, here and here. One of the things that I spent quite a bit of time talking about was how technology, media and government might respond to the current financial crisis. How innovation might, this time round, build a more robust system for the future.
From our (well, Glenn and my) point of view, we think financial services innovation will evolve around a ‘cloud’ model. This model is essentially ‘distributed’ - components of the financial system will be performed by various entities, all knitted together using the web as a delivery platform. Transparency and stability is built through interconnection standards, reputation management systems, and the ability to assemble the components in new and innovative ways to serve niche communities. I’ll save the details for another post, but as part of the session that I gave some some real world examples of new-era financial services that are already at market and enjoying some success. I thought i’d post about some of our favourites here.
Kiva - This one cant be a surprise to many people - the idea is such a winner. You can lend funds (interest free) to people in the third world to help them build businesses or finance their development, helping them out of poverty. Its bringing the great work of people like Dr. Muhammad Yunus and his model of microlending to the internet generation. Its been growing wildly in popularity, and is lending almost $1m USD a week.
Trust Art - A project launched at TED2009, this site aims to connect investors with deserving art projects. Investors take effectively an equity stake in the art project, recieving any of the capital gains if the art sells at the end of the development project. It’s a really interesting new model to fund significant cultural works - a space that is desperate for access to capital. Its a good example of the ‘distributed’ system - the platform, the screening/vetting function and the capital raising/marketing element all separated, knitted together using a web platform. It serves a niche community - artists and art lovers, but its a potentially a very good fit.
Yadyap - This one’s still prelaunch, but has been previewed in a number of places. Its an online alternative to payday loans that utilises the peer-to-peer model. Payday lending is a vicious world, with absolutely horrendous interest rates (up to hundreds of % APR). So long as the credit scoring system is managed well, this has the potential to solve alot of problems. Very liquid for lenders, much cheaper for borrowers. And far less embarrassing.
Txtloan - Not so much online as a mobile play, it allows you to borrow up to GBP100 at very short notice just by texting a number. Funds are deposited instantly in your account and you pay GBP10 for the privledge of holding onto the funds for a week. Cheaper than an overdraft, and potentially very useful if you’re in a tight spot - Its like Vodafone’s IOU but for your bank account.
Zecco - Free sharetrading, so long as you keep a minimum balance in an account (you need the funds there to purchase the shares anyway). ASB, are you listening?
Mint/Wesabe - Again, a couple that are fairly well known, but show very clearly the benefits of a distributed system. Here, these platforms take information from ‘money storage systems’, aka banks, and present it to users in a more useful way - they combine balances and transaction reporting with budgeting and target offers for better financial products. They can even track investments to give a homogenised picture of your financial state of affairs. Very clever, very useful.
Yodlee - Both the above services use this - its essentially an aggregation system for banking information. It allows 3rd party websites (with the consent of the user) to access their banking balances, execute payments/transfers and a raft of other things - its like an API to the banking system.
Valuecruncher - an interesting NZ site that uses crowdsourced information to form valuations of stockmarket companies. It uses a Discounted Cashflow model, and invites users to specify the parameters of the companies performance, then calcuates what the current share price should be based on that information. Its outsourced stock-tips, and it seems to have a growing community of users.
Those are some of the sites that we think are pretty great, and are employing or building around the ‘cloud’ model that I mentioned above. There’s many others out there - if you’ve got some that we’ve missed, put em in the comments below.
