Tuesday, July 30, 2013

Banks, Mobile Technologies and SMAC, Part 3

This article is Part 3 in a series on Banks, Mobile Technologies and SMAC.  Click here to read Part 1 and Part 2.

In this article my colleague Peter Abatan, a Mobile Technology Consultant and banking expert with Cognizant, shares his insights into the digital transformation happening in the banking industry.  This transformation reflects new and innovative business models, the rapid adoption of mobile apps for banking, social media and other cloud based solutions.  In this article Peter and I discuss P2P (peer-to-peer) lending services and their potential integration with Internet based and mobile banks.

P2P lending sites are part of the emerging digital transformation happening in the banking industry. Their purpose is to provide higher returns for investors/savers, while using SMAC (social, mobile, analytics and cloud) based technologies to help find lenders for people/companies that may not meet a traditional bank’s criteria for lending.  They are a in effect, match makers.  They are the match.com for people wanting to lend money for higher returns, and people or companies wanting to borrow it.

P2P lending sites can be risky, however.  There is little protection for investments.  If you invest and a borrower defaults on their loan, your money is at risk.

According to the P2P Finance Association this market sector is growing at a rate of 250% per year, but not all are successful. In December of 2011, P2P lender Quakle became insolvent and many lost their investments.

I believe the logical evolution of this market is for P2P lenders to evolve into, or integrate with Internet/mobile banks.  As an Internet/mobile bank, P2P lenders would be able to expand their products  and services into things like mortgages and insurance to compliment money lending services.

P2P lenders as Internet/mobile banks, will be in a good position to compete with traditional brick and mortar banks as they can offer better rates on savings and other investment tools, plus they will likely have a lower operational cost.   Lower operational costs are the result of not needing to maintain traditional banking processes like check processing, money handling and logistics, large numbers of employees, bank branches and physical security services.

Kevin Benedict, Head Analyst for Social, Mobile, Analytics and Cloud (SMAC) Cognizant
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***Full Disclosure: These are my personal opinions. No company is silly enough to claim them. I am a mobility and SMAC analyst, consultant and writer. I work with and have worked with many of the companies mentioned in my articles.