Monday, 9 February 2009

BarCampBank Valentine's Day

Forsake your loved ones! Your country needs you at BarCampBank in London on Valentine's Day.

Given that a BarCamp is about as grass-roots as you can get without actually going out into your snow-filled garden and digging, it's a great opportunity to question everything from the bottom up - to really turn the world on its head.

While, unfortunately, I have other commitments on Valentine's Day, I'm fascinated by what the attendees will come up with in terms of "new business models in the world of banking and finance", and possibly democratising the financial markets.

In an attempt to help, I plan to jot down on this post various issues and observations that occur to me this week.

Closest to my Zopa heart are person-to-person mortgages and person-to-person invoice discounting for SME's. But I'm aware that those two suggestions assume an awful lot. The real starting point should be what financial problems do people face today, how big are those problems and what array of solutions might solve them? Ideally, this inquiry should not be driven by, or viewed through the lenses of products in the market today. But it would also be interesting to question today's retail products. Do we need credit cards, for example? If so, why? And why/for whom do the financial markets exist. And so on.

Indeed, what would happen if I went AWOL for about 10 hours on Saturday ;-)

Here are my builds:

1. I reckon there are 8 characteristics that any new retail financial service will need to acquire critical mass.

2. Banks can be the back-office of financial services 2.0 - after all, the money that's not currently lent out at Zopa sits in a segregated account at RBS.

3. See Dave Birch's post on payments without banks. My 10 cents worth on alternative currencies:
  • A facilitator would need to gather enough reasonably reliable data on each "currency" for users (or the facilitator itself) to estimate the exchange value.
  • People could list "currencies" they have a surplus/deficit of and the facilitator could show matches, with or without estimates of exchange value.
What functions currently reserved for "authorised" financial institutions could be opened up for more lightly regulated players (following the trend set by e-money and now payment services for example).

4. Chris Skinner has listed various "next generation" financial services firms due to present at Finovate in April.

5. Note that "payment service providers" will be able to passport their services throughout the EU from 1 November 2009 - the UK regs went before Parliament yesterday. Similarly, the E-money Directive is also to be overhauled, largely to reduce the capital burden on e-money businesses, and to ease the restriction on conducting other business.

6. Here's an interesting piece of context. In December 2007, Royal Bank of Scotland paid $100bn for ABN Amro. A year later, the same money would have bought:
  • Citibank $22.5bn
  • Morgan Stanley $10.5bn
  • Goldman Sachs $21bn
  • Merrill Lynch $12.3bn
  • Deutsche Bank $13bn
  • Barclays $12.7bn
  • And with the change $8bn .....they would be able to pick up GM, Ford, Chrysler and the Honda F1 Team.
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