Prosper and Zopa have been making the rounds recently on the VC trail. Each one has closed about $20 Million in their latest institutional kitties. These are interesting businesses as they are the first real 2.0 executions in the finance vertical.

The finance space is one that is difficult to line up with 2.0 value sets because of the shared ownership aspects and the inherent aversion to transparency that anything financial seems to generate. The impact of handing over the creation rights and distribution to a media product is alot different than your retirement nest egg or college tuition. Institutions give you protection and austerity, right?

An interesting analogue would be to take a look at what is happening in bank branches these days. All those high teller counters, vaults and other cues of safe keeping are giving way to concierges, associates who chat with clients over coffee tables. The retail experience for banking is becoming a more collegial one as the assymetry between the banker and the banked is becoming less and less.

Another interesting trend to look at would be the spectacular emergence of online banking, the direct model in industry parlance. This allows banks to take deposits from people outside of their area of trade. Places where they have no branches at all. Which completely upends the previous model of banks as bastions of reliability and safe keeping. The direct model is really an extension of what was happening already with regional banks getting swallowed up by giant institutions. No longer do you need the First or Second Bank of Your Home Town or State. Live in New York? Bank with Washington Mutual. How about Bank of Internet?

So now Prosper and Zopa bring forth a model that actually just eliminates the bank all together. Technically linking those with funds to those with a need for credit. Great idea and it capitalizes perfectly with the new generation bank customers who love the collegial bank advisor and direct banking using supermarket ATMs to deposit funds or out-of-state bank with a cool brand.

Given all these counter-indicative trends, the shift in the consumer banking industry has been on going for some time now and the P2P and online only models are the shift that will take what was a corporate monotolith only policy and push it down into the shallow end of the Chris Anderson’s long tail curve. We should see a few more Prospers and Zopas launch as these two get some operating time under their belts and increase their volume of outstandings.

• Google Checks In, Banks Check Out
• Speaking Engagement

This entry was posted on Monday, July 24th, 2006 at 9.37am and is filed under 2.0, long tail. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.