Webank V1.0

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Wednesday January 21st 2009Presented by NESTA Connect & openbusiness

twitter: #webank

Tonight is an expedition into peer-to-peer finance

What the role of innovation in a downturn?

This is a vibrant and emerging area

And an international one too…

Table courtesy of Anthony Evans

Interest in alternative currencies is also note-worthy

Tonight we will enjoy both a showcase…

And a discussion & debate

James Gardner, Bankervision

Giles Andrews, MD Zopa UK

Umair Haque, Havas Media LabChristian Alhert, openbusiness

Why are we here at NESTA?

NESTA Connect: experimental projects which look to break down traditional boundaries with ways of working

NESTA Social Finance: developing the finance market forsocial enterprises

NESTA Investments: venture capital funding for earlystage start-up companies

NESTA Policy & Research: influencing innovation policyacross all sectors

And if you want to find them in the room:

Sarah McGeehan

Andrew Small

Head of Social FinanceRoland HarwoodDirector, NESTA

Connect

NESTA Investments

Richard BrahamSenior Policy

Associate

But I’m more interested in youBut I’m more interested in you

flickr: Matthew Field

But I’m more interested in youWhich organisations are in the room?

Dave Birch, Digital Money Forum

Anthony Evans, startupexchange

But I’m more interested in youWe also have a wealth of P2P expertise

Ryan Steele, Prodigy Finance

David Morris, Bearing Point

So let’s get on with it

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What is Zopa?

People have described Zopa as:• Like eBay for money

• An anti-bank

• A bank(!)

• Shopping for money online

• A money cooperative

We refer to Zopa as a social lending platform

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What is a social lending platform?

• We use technology to allow people who want to lend money, and people who want to borrow money, interact directly with each other

• ‘No middlemen’: less overheads, better rates for lenders and borrowers

• ‘Philanthropic’ appeal:– borrowing from real people– lending to those who need help

• Zopa doesn’t invest your money - you do

Zopa stands for ‘Zone Of Possible Agreement’

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How does it all work?

• Each individual has control and makes choices about lending and borrowing - this creates the marketplace

• Zopa facilitates and effects these choices in the marketplace:– We ensure borrowers and lenders are reliable and trustworthy– We ensure borrowers are creditworthy and of suitable risk– We match lenders’ funds to borrowers’ applications– We manage the administration of the loan and repayments

• Zopa itself does NOT appropriate your funds for its own investment

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What happens in practice…

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Meet our typical lender:• His name is Dave• He’s 40 years old• Lives in South West London• Lends about £1,300

Meet our typical borrower:• His name is also Dave (really!)• He’s also 40 years old• Lives in Birmingham• Borrows about £4,300 for a car

Zopa does the clever bit:• Assess creditworthiness using

an automated scorecard• If ineligible the prospective

borrower can’t apply• If eligible we match lenders’

offers to the borrower

Zopa further assesses the risk:• Underwriters review each case

on individual merits• They make an informed decision

based on several criteria• If the application is approved the

loan is disbursed

The challenges of a social lending platform

• Perception that the Zopa marketplace will be a risk-free environment

• ‘Human’ / social element can foster indignation or the feeling of being cheated when a debt goes bad

• Providing lenders with the right amount and quality of information to make an informed decision

• Dissemination of knowledge (understanding how to make good use of the disposable tools)

• ‘On demand’ culture: expectation of lenders and borrowers

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Zopa miscellany

• £31m (over 7,000) loans disbursed since March 2005, including £12.6m (over 2,600) loans in 2008

• 0.2% bad debt experienced to date

• Uses for loans include:– Car loans (over 2,500)– Weddings (over 100)– Surgery/Medical Expenses– Supporting weird and wonderful livelihoods

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And finally…

It’s pronounced

/ˈzo pɑ/

(not /ˈzu pɑ/ , or even /ˈzɒpər/!!)

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CAN PEOPLE REPLACE INSTITUTIONS?

Rahul Verma, Co-founder

A VERY TIMELY QUESTION Web 2.0

Social Network phenomena

Unprecedented meltdown in Banking

LESSONS TO BE LEARNED Organisations of the future must be

fully engaged with the people they serve

Incentives must align to encourage the right behaviour

Society must re-adopt a healthier approach to money - savings underpinning spending, not spiraling debt

EXTRAORDINARY OPPORTUNITY New thinking is required

Old models need revisiting

People need to take back control

KuberaMoney

A perfect example of how people can replace institutions

BACK TO THE FUTURE

ROSCAs(Rotational Savings and Credit Associations)

WHAT’S A ROSCA? Oldest form of micro-finance

Used extensively around the world

Similar to Credit Unions and Building Societies

Serve those with regular income and social capital

COMPARISON TO OTHER LOANSROSCAs have the ability to compete with existing personal loans

£7,500 loan over 15 months

ROSCA Loan 1 Loan 2 Loan 3Credit profile ? Good Fair PoorAPR ? 7.8% 17.9% 50.4%Interest paid (£) 372.92 387.25 859.00 2,258.75

KEY FEATURES OF A ROSCA Simple and completely transparent

Provides better rates for both borrowers and savers

Provides responsible and affordable credit

Highly flexible, human and social

Leverages pre-existing trust networks

kuberamoney.com will be launching soon...

ROSCAs for the 21st Century

“The Foreign Exchange Revolution”

Todd Veri – CEOMidpoint & Transfer Ltdtodd.veri@mpnt.com

The Murky World of Foreign Exchange(pi·ra·nha also pi·ra·ña) noun

“Piranhas aren't the man-eaters folklore would suggest; you're much more likely just to lose a

toe”(1)(1) http://www.practicalfishkeeping.co.uk/pfk/pages/item.php?news=1180

Disintermediation -

• the removal of intermediaries in a supply chain: "cutting out the middleman”

(Wikipedia)

Midpoint takes Bankers and Brokers out of the equation

- Saving Users £££

Midpoint & Transfer is Different

• Spread-Free Foreign Exchange• Anonymous Peer to Peer Platform• Free Trial• Same Day Match Guarantee• Flat Fee includes Funds Transfer

1a) Alice in England Places Euro Order

Midpoint & Transfer

1b) Bob in Ireland Places Pound Order

2) Orders Matched, Notifications and

Instructions are Sent

3) Using Online Banking, Users Remit Funds (including Fees)

4) Funds Verified and Transferred to Payees’

Accounts (1-3 days)

Segregated Trust

Accounts

Wine Supplier in France

Car parts Manufacturer in Scotland

Midpoint Process- Step by Step

Hidden Cost of Spread

International Transfer Fee

Receiving Fee

Midpoint Flat Fee

Savings

£173

£124

£373Savings

£296

£10,000 Transfer £60,000 Transfer

With a £30 Flat Fee - The average importer would save over £30,000 a year by using Midpoint & Transfer

(1) Documented In-house Research June 2007

With Midpoint – Money Arrives in One Piece

“Given a Scarcity of Food – Piranhas will turn on each other”(1)

(1) http://www.practicalfishkeeping.co.uk/pfk/pages/item.php?news=1180

Coming soon to – www.midpoint.com

•Disintermediates Foreign Exchange

•No Spread – Serious Savings

•Disruptive, marketable, and scalable

For further information: email - todd.veri@mpnt.com

And a discussion & debate

James Gardner, Bankervision

Giles Andrews, MD Zopa UK

Umair Haque, Havas Media LabChristian Alhert, openbusiness

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