Wednesday January 21 st 2009 Presented by NESTA Connect & openbusiness twitter: #webank ob open business

Tonight is an expedition into peer-to-peer finance

What the role of innovation in a downturn?

This is a vibrant and emerging area

And an international one too… Table courtesy of Anthony Evans

Interest in alternative currencies is also note-worthy

Tonight we will enjoy both a showcase…

And a discussion & debate James Gardner, Bankervision Giles Andrews, MD Zopa UK Umair Haque, Havas Media Lab Christian Alhert, openbusiness

Why are we here at NESTA? NESTA Connect : experimental projects which look to break down traditional boundaries with ways of working NESTA Social Finance : developing the finance market for social enterprises NESTA Investments : venture capital funding for early stage start-up companies NESTA Policy & Research : influencing innovation policy across all sectors

And if you want to find them in the room: Sarah McGeehan Andrew Small Head of Social Finance Roland Harwood Director, NESTA Connect NESTA Investments Richard Braham Senior Policy Associate

But I’m more interested in you But I’m more interested in you flick r : Matthew Field

But I’m more interested in you Which organisations are in the room?

Dave Birch, Digital Money Forum Anthony Evans, startupexchange But I’m more interested in you We also have a wealth of P2P expertise Ryan Steele, Prodigy Finance David Morris, Bearing Point

So let’s get on with it ob open business

What is Zopa? People have described Zopa as: Like eBay for money An anti-bank A bank(!) Shopping for money online A money cooperative We refer to Zopa as a social lending platform

People have described Zopa as:

Like eBay for money

An anti-bank

A bank(!)

Shopping for money online

A money cooperative

We refer to Zopa as a social lending platform

What is a social lending platform? We use technology to allow people who want to lend money, and people who want to borrow money, interact directly with each other ‘ No middlemen’: less overheads, better rates for lenders and borrowers ‘ Philanthropic’ appeal: borrowing from real people lending to those who need help Zopa doesn’t invest your money - you do Zopa stands for ‘ Z one O f P ossible A greement’

We use technology to allow people who want to lend money, and people who want to borrow money, interact directly with each other

‘ No middlemen’: less overheads, better rates for lenders and borrowers

‘ Philanthropic’ appeal:

borrowing from real people

lending to those who need help

Zopa doesn’t invest your money - you do

Zopa stands for ‘ Z one O f P ossible A greement’

How does it all work ? Each individual has control and makes choices about lending and borrowing - this creates the marketplace Zopa facilitates and effects these choices in the marketplace: We ensure borrowers and lenders are reliable and trustworthy We ensure borrowers are creditworthy and of suitable risk We match lenders’ funds to borrowers’ applications We manage the administration of the loan and repayments Zopa itself does NOT appropriate your funds for its own investment

Each individual has control and makes choices about lending and borrowing - this creates the marketplace

Zopa facilitates and effects these choices in the marketplace:

We ensure borrowers and lenders are reliable and trustworthy

We ensure borrowers are creditworthy and of suitable risk

We match lenders’ funds to borrowers’ applications

We manage the administration of the loan and repayments

Zopa itself does NOT appropriate your funds for its own investment

What happens in practice… Meet our typical lender: His name is Dave He’s 40 years old Lives in South West London Lends about £1,300 Meet our typical borrower: His name is also Dave (really!) He’s also 40 years old Lives in Birmingham Borrows about £4,300 for a car Zopa does the clever bit: Assess creditworthiness using an automated scorecard If ineligible the prospective borrower can’t apply If eligible we match lenders’ offers to the borrower Zopa further assesses the risk: Underwriters review each case on individual merits They make an informed decision based on several criteria If the application is approved the loan is disbursed

Meet our typical lender:

His name is Dave

He’s 40 years old

Lives in South West London

Lends about £1,300

Meet our typical borrower:

His name is also Dave (really!)

He’s also 40 years old

Lives in Birmingham

Borrows about £4,300 for a car

Zopa does the clever bit:

Assess creditworthiness using an automated scorecard

If ineligible the prospective borrower can’t apply

If eligible we match lenders’ offers to the borrower

Zopa further assesses the risk:

Underwriters review each case on individual merits

They make an informed decision based on several criteria

If the application is approved the loan is disbursed

The challenges of a social lending platform Perception that the Zopa marketplace will be a risk-free environment ‘ Human’ / social element can foster indignation or the feeling of being cheated when a debt goes bad Providing lenders with the right amount and quality of information to make an informed decision Dissemination of knowledge (understanding how to make good use of the disposable tools) ‘ On demand’ culture: expectation of lenders and borrowers

Perception that the Zopa marketplace will be a risk-free environment

‘ Human’ / social element can foster indignation or the feeling of being cheated when a debt goes bad

Providing lenders with the right amount and quality of information to make an informed decision

Dissemination of knowledge (understanding how to make good use of the disposable tools)

‘ On demand’ culture: expectation of lenders and borrowers

Zopa miscellany £31m (over 7,000) loans disbursed since March 2005, including £12.6m (over 2,600) loans in 2008 0.2% bad debt experienced to date Uses for loans include: Car loans (over 2,500) Weddings (over 100) Surgery/Medical Expenses Supporting weird and wonderful livelihoods

£31m (over 7,000) loans disbursed since March 2005, including £12.6m (over 2,600) loans in 2008

0.2% bad debt experienced to date

Uses for loans include:

Car loans (over 2,500)

Weddings (over 100)

Surgery/Medical Expenses

Supporting weird and wonderful livelihoods

And finally… It’s pronounced / ˈ zo p ɑ / (not / ˈ zu p ɑ / , or even / ˈ z ɒ pər/!!)

It’s pronounced

/ ˈ zo p ɑ /

(not / ˈ zu p ɑ / , or even / ˈ z ɒ pər/!!)

CAN PEOPLE REPLACE INSTITUTIONS? Rahul Verma, Co-founder

A VERY TIMELY QUESTION Web 2.0 Social Network phenomena Unprecedented meltdown in Banking

Web 2.0

Social Network phenomena

Unprecedented meltdown in Banking

LESSONS TO BE LEARNED Organisations of the future must be fully engaged with the people they serve Incentives must align to encourage the right behaviour Society must re-adopt a healthier approach to money - savings underpinning spending, not spiraling debt

Organisations of the future must be fully engaged with the people they serve

Incentives must align to encourage the right behaviour

Society must re-adopt a healthier approach to money - savings underpinning spending, not spiraling debt

EXTRAORDINARY OPPORTUNITY New thinking is required Old models need revisiting People need to take back control

New thinking is required

Old models need revisiting

People need to take back control

Kubera Money A perfect example of how people can replace institutions

A perfect example of how

people can replace institutions

BACK TO THE FUTURE ROSCAs (Rotational Savings and Credit Associations)

ROSCAs

(Rotational Savings and Credit Associations)

WHAT’S A ROSCA? Oldest form of micro-finance Used extensively around the world Similar to Credit Unions and Building Societies Serve those with regular income and social capital

Oldest form of micro-finance

Used extensively around the world

Similar to Credit Unions and Building Societies

Serve those with regular income and social capital

COMPARISON TO OTHER LOANS ROSCAs have the ability to compete with existing personal loans £7,500 loan over 15 months ROSCA Loan 1 Loan 2 Loan 3 Credit profile ? Good Fair Poor APR ? 7.8% 17.9% 50.4% Interest paid (£) 372.92 387.25 859.00 2,258.75

ROSCAs have the ability to compete with existing personal loans

KEY FEATURES OF A ROSCA Simple and completely transparent Provides better rates for both borrowers and savers Provides responsible and affordable credit Highly flexible, human and social Leverages pre-existing trust networks

Simple and completely transparent

Provides better rates for both borrowers and savers

Provides responsible and affordable credit

Highly flexible, human and social

Leverages pre-existing trust networks

kuberamoney.com will be launching soon... ROSCAs for the 21 st Century

kuberamoney.com will be

launching soon...

ROSCAs for the 21 st Century

“ The Foreign Exchange Revolution” Todd Veri – CEO Midpoint & Transfer Ltd [email_address]

The Murky World of Foreign Exchange (pi·ra·nha also pi·ra·ña) noun “ Piranhas aren't the man-eaters folklore would suggest; you're much more likely just to lose a toe” (1) (1) http://www.practicalfishkeeping.co.uk/pfk/pages/item.php?news=1180

Disintermediation - the removal of intermediaries in a supply chain: "cutting out the middleman” (Wikipedia) Midpoint takes Bankers and Brokers out of the equation - Saving Users £££

the removal of intermediaries in a supply chain: "cutting out the middleman”

(Wikipedia)

Midpoint & Transfer is Different Spread-Free Foreign Exchange Anonymous Peer to Peer Platform Free Trial Same Day Match Guarantee Flat Fee includes Funds Transfer

Spread-Free Foreign Exchange

Anonymous Peer to Peer Platform

Free Trial

Same Day Match Guarantee

Flat Fee includes Funds Transfer

1a) Alice in England Places Euro Order Midpoint & Transfer 1b) Bob in Ireland Places Pound Order 2) Orders Matched, Notifications and Instructions are Sent 3) Using Online Banking, Users Remit Funds (including Fees) 4) Funds Verified and Transferred to Payees’ Accounts (1-3 days) Segregated Trust Accounts Wine Supplier in France Car parts Manufacturer in Scotland Midpoint Process- Step by Step

Hidden Cost of Spread International Transfer Fee Receiving Fee Midpoint Flat Fee Savings £173 £124 £373 Savings £296 £10,000 Transfer £60,000 Transfer With a £30 Flat Fee - The average importer would save over £30,000 a year by using Midpoint & Transfer (1) Documented In-house Research June 2007

With Midpoint – Money Arrives in One Piece “ Given a Scarcity of Food – Piranhas will turn on each other” (1) (1) http://www.practicalfishkeeping.co.uk/pfk/pages/item.php?news=1180

Coming soon to – www. midpoint.com

Disintermediates Foreign Exchange No Spread – Serious Savings Disruptive, marketable, and scalable For further information: email - [email_address]

Disintermediates Foreign Exchange

No Spread – Serious Savings

Disruptive, marketable, and scalable

And a discussion & debate James Gardner, Bankervision Giles Andrews, MD Zopa UK Umair Haque, Havas Media Lab Christian Alhert, openbusiness

keep an eye on www.webank.org.uk blogs.nesta.org.uk/connect | openbusiness.com ob open business