The document discusses the rise of social lending, where individuals can directly lend and borrow money from each other through online platforms like Zopa, cutting out the traditional banks. It provides an overview of how social lending works, highlighting benefits for both borrowers who receive lower rates and lenders who can earn higher returns compared to traditional banking options. The document also looks at challenges and opportunities for social lending platforms to further grow by embracing principles of community, transparency, control and ethicality.

1. Social Lending:
Where did it come
from, where is it
going?
James Alexander
Friday 30th November 2007

2. Consumers are changing
“… The consumer
revolution of the last 30
years is giving way to the
Freeform Revolution of
the next 30 …”

3. We have been here before
Turning
INSTALLATION DEPLOYMENT
Point
TECHNOLOGY
REVOLUTION ERUPTION FRENZY GOLDEN AGE MATURITY
1st ‘Industrial Panic
1825
Canal
Revolution’ 1797
1771 mania 1819
1793 1810
2nd Panic
Age of Steam
Railway 1847 1873
1866
& Railways 1836 mania 1857
1829
Revolutions1848
1890
3rd Age of Steel, Electricity 1903
Argentina
& Heavy Engineering The “Great 1920
USA 1907
1875 (Baring)
Depression” “Rich man’s
USA
panic”
1893
4th Age of Oil, Automobiles 1929 1930s
& Mass Production 1974
1920* USA stock 1960
and
1908 “Oil crisis”
mania
WWII
5th 1987 1997
Age of Information
Asia 2005
?
& Telecommunications 1974* 1989 20??
1971 eBay
2000
“Oil crisis” Collapse
2nd World NASDAQ
Source: Carlota Perez ‘Technological Revolutions and Financial
Capital – the Dynamics of Bubbles and Golden Ages’

4. Freeform companies, enabled by
technology are transforming industries
Turning
INSTALLATION DEPLOYMENT
Point
TECHNOLOGY
REVOLUTION ERUPTION FRENZY GOLDEN AGE MATURITY
5th 1987 1997
Age of Information
Asia 2005
?
& Telecommunications 1974* 1989 20??
1971 eBay
2000
“Oil crisis” Collapse
2nd World NASDAQ
2000 2010
2005
?
?
P2P Video
P2P Payments P2P Voice
Social Networks
?
?
P2P Trading P2P Social
Personalised
P2P Lending
Search P2P Photos
P2P Info
iTunes for music … Zopa for money
eBay for things …

5. The online marketplace where people
meet to lend and borrow money
With no bank in the middle, both parties get better rates
Borrowers Lenders
• Low, low rates • Great Returns
• No banks • It’s human
• It’s fair • It’s safe
• You’re in control
Lenders receiving a c.30% better return than base rate; Borrowers borrowing c.30% below the market

6. Financial return and social reward
Working, differentiated, compelling
Launched in the UK March 2005
•
>180,000 members
•
Borrowers getting the cheapest
•
loans in the country
Lender returns 7-11%
•
<0.2% defaults
•
Just launched in Italy
•
Imminent launch in US
•

7. Control, community, transparency and
ethicality key for value and trust
Openness
“No other financial site that I have visited
is highly
has the guts to run a discussion board
valued
and take it on the chin.
That makes me feel like I am part of a
Users feel community and seems to trigger a sense of
valued belonging. With belonging comes pride and
and passion.
committed
When I tell my friends about Zopa I feel hurt
Users by any negative comments they make as
become though the site was my own, and for that
champions reason it gets me all wound up when I see
of Zopa even the tiniest glitches on the site”
Mosshill, Zopa lender (Oct 18 2006, 09:17 AM)

8. An evolving model
More involving, more viral

9. Social Lending is already global
Expect proliferation, niches developing, consolidation

10. Parting challenges
What new opportunities can you
•
see to serve Freeformers?
How will you provide an experience
•
that embraces
• Community?
• Transparency?
• Control?
• Ethicality?
How will you take your brand into a
•
consumers life and give up
demanding they hold a relationship
with you?