I’ve posted extensively at my displeasure at how backwards banking systems invariably seem to be, I’ve also commented at length about my belief that 2008 will be the year that we see social networking sites becoming truly value adding. Put the two together and you have a pretty strong case for subverting a significant proportion of commerce as it is transacted today and putting it into a 2.0 framework.

RWW predicts that 2008 will be the Year of Business Networking, with predictions that LinkedIn will either IPO or be bought. Clearly the sort of change we’re talking about here is significantly gargantuan to need serious amounts of both capital and credibility to pull it off, public listing or ownership by a publicly traded company would provide the fuel for LinkedIn to rally up the ante.

The ripple project seeks to subvert banking by creating an opportunity for peer to peer financial transactions to occur. The ripple project is an open source one and this will be its limiting factor. To really subvert banking will take a neutral platform players with significant scale and credibility.

Google would be the natural choice – anyone want to comment on the possibility?

Ben Kepes

Ben Kepes is a technology evangelist, an investor, a commentator and a business adviser. Ben covers the convergence of technology, mobile, ubiquity and agility, all enabled by the Cloud. His areas of interest extend to enterprise software, software integration, financial/accounting software, platforms and infrastructure as well as articulating technology simply for everyday users.

  • Hey Ben

    Happy New Year

    It is interesting to me that you complain how “backwards” banking systems “invariably seem to be”….

    I have been working overseas for 5 years now ( 2 years in Dublin, 3 and counting in London ) and I have to say this : banking systems in New Zealand are absolutely wonderful and magical compared to the crap we put up with over here. You have no idea !

    It took me weeks to even open a bank account. I had to prove that I was not an Al Qaeda terrorist, which took some doing. I then had to prove that I had been in my current address for 3 years, which was rather difficult because I had not even been in it for 3 days when I applied.

    I cannot help but compare this with the fact that on my last trip back to NZ, very recently, to see my kids, I went in to the ASB to open an account and left within ten minutes, complete with account, ATM card, Internet banking, and everything, all done.

    Over here if you do an electronic funds transfer to pay someone, you hold your breath and hope it will get there. And that it will make it to the recipient within 5 days. This is true ! Unless you pay 35 pounds sterling, in which case the recipient may get it within 3 days. Unbelievable.

    Recently my bank ( Barclays Premier ) introduced new Pin Pads for use on the Internet banking site. OK I can completely understand the need for them – they are trying to protect my money, after all – but mate it takes ages and ages to even log on and authenticate – and if you want to make a money transfer to someone you haven’t paid before, well, make a cup of coffee and cancel your appointments and deadlines for the rest of the day.

    I used to get told that NZ “leads the world” in terms of banking services, particularly in relation to electronic services ( cards, Internet banking and so on ). I used to be sceptical, but dude, I now absolutely believe that.

    Credit where it is due….trust me, it can always be worse !

  • John – Happy New Year to you too. So I agree, the banking system in the UK is worse than in New Zealand, although that doesn’t mean that it’s any good here – two degrees of bad and all that.

    I just get the impression that the thinkers inside th banks don’t do much actual thinking about what their customers want and need – or maybe they’re trying to protect their legacy revenue and are too reluctant to risk that by changing the paradigm.

    Whatever the reason things will start to change

    All the best for ’08 – keep in touch….

  • Hi Ben,

    I’d put it down to institutional inertia, which is commen in all large organisations both public and private, a phenomon described by Herbert Simon which he called satisficing where an agent working for a large organisation is not compelled to reach the optimimal result.

    Something which is particularly prevalent in an industry where a firm or bloc of firms have very little competition in their particular segment of the market such as banking has due to the monopoly that the State has seen fit to grant them. The problem is further compounded by the fact that Directors of banking corporations tend to be risk averse, because they have fidiiary responsiblity to protect the value of their shareholder’s shares in the company, which is overcome only when the payoff is substantially more than it would be if they changed nothing, which is why small firms tend to be far more innovative and are then bought out by larger firms in a related market segment, because due to dominance of the marketplace by large firms, startups are limited to new industries with low startup costs (Information Technology, etc) and other barriers to entry, especially due to State interventions (tax code, subsidies, regulations that are designed to help favoured firms.

  • I think it’s more likely to be a social networking site, facebook maybe or possibly a new entrant.. who knows?

    A credit card company even. But the real challenge is the money system itself. Money will be seen as a barrier to trade and enterprise and like all other frictions in the market it will be removed.

    We’ve had the current system for 400 years and its not going to drop away overnight. The barter systems will play a part as will the P2P lending systems.

    People are still unaware of what money really is so some serious education will be required before anything major changes.

  • At first I wondered if banks might set up their own virtual communities to facilitate marketing activities and e-commerce. But think about the liabilities and privacy issues involved.

    My second thought is that we already have communities of traders such as TradeMe. A number of payment methods are offered including a “SafeTrader” system that guarantees payment for a small brokerage fee.

    TradeMe virtual bank next? I wouldn’t rule it out.

  • Banks will be too slow to move. They are protecting a 400 year old system.

    Trademe is unlikely also. Their customer service is poor at best and they are in the same space as Barter systems who are probably more advanced in this area.

    I think Jamesey is on the right track. I’ll try and post later today or tomorrow on the Ripple process and how that might pan out.

  • The organisations that I believe are most likely to adopt and deploy a system like this are Credit Unions who, according to an article that I read recently are intending to challenge the banks on equal terms, but some don’t want to actually become banks themselves.


    “At first I wondered if banks might set up their own virtual communities to facilitate marketing activities and e-commerce.”

    I’ve been planning to develop a virtual market place that connects small businesses with customers through the internet for some time now, since I read about LETS or Local Exchange and Trading Systems in a book about Ethical Investment. BT’s TradeSpace sounds very similar to what I had envisioned.

  • Hi Jamesey. BTTradespace is a perfect example of the “long tail” at work. There is a home business on the site selling ornamental hedgepigs. Gotta be a market out there somewhere, right?

    But according to Rod there is no place in the market for TradeMe wannabes??

  • Hi Paul,

    I’m intending to fill a local niche rather than actually take on TradeMe on equal terms. I had LETS in mind rather than TradeMe when I envisioned the design of my project.

    I planning it as more of a community development project than a business to facilitate local self-sufficiency and cooperation.

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