B2B Lending

Gartner has recently warned banks that consumer peer-to-peer lending platforms are a force to be reckoned with. Any business with a UK consumer credit licence can lend directly to consumers at Zopa, but the timing also looks good for SME's to get into their own peer-to-peer market without the aid of the banks.

A recent survey commissioned by Belgian bank KBC amongst businesses with turnover of £10m to £1bn suggests that UK businesses are continuing to borrow, even at higher rates.

“The people in the real economy, not the financial economy, are saying: ‘We’re still going, but financial fuel is going to get a lot more expensive for us,’” said Cameron Marr, general manager of the London branch of KBC Bank.

At the same time, however, 70 per cent of respondents expect credit to become less easily available. They foresee the cost of borrowing rising and loan covenants becoming tighter. The number of corporate defaults is expected to increase."

Necessity, as they say, is the mother of invention...

Time is Right to Innovate in Retail Financial Services

Two reports this week confirm it for me.

The first was from MoneyExpert.com, as reported in the FT:

"Since the revised banking code made it easier for customers to change their current account provider in 2005, more customers have taken advantage of the option. Over a six-month period to the end of October 2007, the number of clients changing provider rose from 1.8m to 2.3m. “The switching index shows that around 300,000 people a month are choosing to change their current account provider, and overdraft facilities are an important component for choosing an account,” said Sean Gardner, chief executive of MoneyExpert.com."

... Customer dissatisfaction over bank overdraft fees, as well as concerns over financial security prompted by the problems of Northern Rock, have accelerated the number of switches made recently, according to Mike Naylor at personal finance website uSwitch.com."

The second was from the Bank of England, to the effect that unsecured lending to households and small businesses is suffering a large reduction, and spreads between savings and unsecured lending have widened and are likely to widen further during Q1 2008. In other words, banks are helping themselves to more of consumers' cash as a result of their exposure to the credit crunch.

So, customers are adjusting to recent banking shocks and making alternative arrangements. And, while the banks need to offer incentives to retain or attract those customers, their hands are tied when it comes to anything really substantial.

The timing is great for innovation and new entrants to the retail financial services marketplace.

Yet the key to how retail financial services should develop is how consumers actually view and use money. Today's products and infrastructure are generally designed to suit the banks and other product providers, and they are ill-equipped to innovate from the consumer's standpoint. I reiterate my November prediction for 2008. And for my money, the essential characteristics of Financial Services 2.0 will mean that banks retreat from "owning" customer relationships to back-office service provision.

PS 7 Jan '08: First Direct's recent offer of simply paying people £100 to switch current accounts and receive the same old products, underlines the lack of real innovation amongst retail banks. Note the requirement to take an extra product or maintain a balance of £1500 in a nil interest account in order to avoid a £10 a month fee. The only real competition amongst retail banks is in the size of their marketing budgets.

PPS 21 Jan '08: The proportion of Britons still getting their financial advice from high street banks has declined from 28% in 2003 to just 4%.

How to Promote Financial Capability

See the German blog immobilienblasen, with thanks of course to Messrs Byrd & Fortune and The South Bank Show.

HM Nanny Bombs in Nuclear Clean-up

HM Nanny is in fine fettle, commanding the nation's workers to get healthy and demanding that kids must wait until they're 18 before hurtling around the country's roads (which will help the ailing job figures, by the way, to the extent that these unreliable teens might dare to drive to work).

These subtleties are what really count in government. After all, three quarters of the country wants the government to tell us how to live our lives in detail.

So, there was no sense in Gordo galavanting on our behalf at the signing ceremony of the EU Constit... er, sorry, "Reform Treaty", when there was a meeting of the House of Commons "liaison committee" to attend.

And if the government can't control the security of people's personal information, then it can at least have a policy of being transparent when they get it wrong. And keep logs of the problems. And undertake investigations. You never know, people might just get sick of hearing about it all and stop bothering to care about their personal security anyway.

And then there is the distraction of targets. And of reports of performance against targets.

We are blinded by the detail.

But just for a laugh, I looked at the Autumn 2007 Performance Report of the Department for Business, Enterprise and Regulatory Reform, or "BERR". That's the department charged with promoting enterprise and cutting red tape, I'll have you know.

Footnote 6 on page 5 gives you an idea where the report is headed:

"Factors affecting performance are only discussed for targets from the current spending review [undertaken in 2004]. The performance on targets from previous spending reviews can no longer be influenced since the period covered by them has ended."

In other words, if they miss the targets, the slate gets wiped clean.

And here's what we got for our tax money spent on promoting enterprise and cutting red tape:

"Of the ten PSA targets from SR04 which BERR is responsible for delivering, five are assessed as on course to be delivered, two are assessed as showing slippage, two are split up and assessed in more detail by sub-target (with most of the sub-targets assessed as on course for each) and one further target is yet to be assessed."

5 out of ten.

But what of the targets "showing slippage"?

Pah! They're only concerned with fuel poverty in vulnerable households, reducing EU trade barriers to help developing countries and nuclear clean-up. "Greater choice and commitment in the workplace" hasn't even been assessed.

I'm sorry, did you say, "nuclear clean-up"?

Ah, yes... Target 9, page 7:

"reduce the civil nuclear liability by 10% by 2010, and establish a safe, innovative and dynamic market for nuclear cleanup by delivering annual 2% efficiency gains from 2006-07; and ensuring successful competitions have been completed for the management of at least 50% of UK nuclear sites by end 2008."

I see. The same government that tells us how to live our lives is also dumping our unencrypted personal data in Iowa and failing to clean up its own nuclear waste.

Somehow, I reckon life could get pretty warm around here during '08.

Better make this New Year's Eve party a big one. Enjoy.

TV's Perfect Storm?

While UK television execs are telling themselves what they need to get through the day as viewing figures slump in favour of the internet, the Hollywood writers' strike drags into its second month and sees TV writers exploring their own web options and Murdoch's MySpace giving weight to an online broadcasting trend.

Sport and (un-scripted) reality TV shows (including the "News"?) are about the 'freshest' US TV broadcast content out there, which heralds a giant audience moving online for the latest in entertainment. That migration should include viewers in markets like Australia that screen a high proportion of US television content, as well as viewers in other markets following more selected content. Advertisers will no doubt follow the migration like lions follow wildebeest (although, of course, online nobody knows you are a wildebeest).

All of this suggests that TV execs will have to pay even bigger bucks for good writing and sports rights to keep themselves in a job.

PS: 7 Jan '08, a survey commissioned by MySpace says kids would rather network online than watch TV:

"A group of 18- to 24-year-olds drawn from 1,000 people surveyed by Future
Laboratory said it would rather spend 15 minutes visiting social networking
sites than watching television, reading, playing video games or talking on
mobile phones."