The future of business?

Another bold question, a new way to conduct business in the future, well this refers to a relatively new paradigm anyway.  This blog pays homage to peer to peer principles (referred to as p2p) and is now used in different arena's, lending is a major game player and also venture capital (funding).

You need to have an understanding of the principles to understand peer to peer otherwise this argument may confuse.  Basically it's people like lending money direct to people, but a company like Zopa finds you the customers, so acts as an agent for collecting the debt etc.  However, it is an investment so you have to deposit a sum of money with them and they lend it too lots more people.  This means in theory your investment is spread amongst 10's or 100's of different people, therefore, you don't have all your eggs in one basket and helps mitigate your risk (of non-paying customers).  Some people call this crowd sourcing or crowd funding, but its the same thing really,  that's just semantics.

Companies like Zopa have already lent approximately £223million (their figures) and is growing all the time and they are reporting very modest non-paying customers (bad debt), which actually forecasts this is reducing each year!  This sounds great in principle, its all Internet based, no banks to make appointments with or over eager sales men, you look on their easy to use sites, get your credit status checked and bingo.

So this provides a stream for investors and provides a portal for a people to attain unsecured funds, however, there are serious issues behind their whole model.  The regulation is limited, there is the Office of Fair Trading for unsecured loans, but this is nothing like the FSA.  As an investor you have no protection over your investment, its not government backed like the banks are, so if ZOPA suddenly closes what happens?  What happens if more and more people started skipping payments and defaulted on their loans?  What would happen if more competition join this market place (surely this is inevitable), there will be fierce competition for lending rates and thus investors returns will shrink.

Personally I believe its a great platform for certain types of borrowers and context but the market share has limited potential without better protection.  The industry cannot continue without thought as to how the finance industry has performed in the last century, especially our current economic climate and the near collapse of several banking institutions.

One useful avenue for P2P is sites like kickstarter, this website is truly marvellous.  Its a home to aspiring talent and there ideas, creations and inventions, they pitch their idea, ask for certain funding levels and if they manage to meet their funding requirement there project gets the go ahead.  There is one massive difference here, not the people no, its the reason it exists, people DONATE money to these ideas.  Some of the projects you will earn a reward of a mention in there artifact or get a limited edition dependant on the idea.  Basically its like donating to a charity but aimed at aspiring talent instead, I am a massive fan and watched the Kickstarter site for some time now.  Have a search on the web at some of the ideas, some have funded very quickly and gone on to success.  It's just  a shame talent has to beg for this money to help them, there are such good products and innovative ideas to be hold, go look now!

So you can see P2P is hear to stay, with the likes of Kickstarter and Zopa using this for very different causes, there are interesting times ahead, so you have to wonder who will the banks lend to in the future???????????