Peer-to-peer vs Banks: who innovates the most?

The following is a true story, it dates back a few years and I still haven't found a solution.

I'm meeting with a staffer at the ASB bank. “Do you have an application that will automatically track my spending habits and place them in predefined buckets so I can see where, what and when I’m spending my money?”

“No, but that’s a great idea. You should get in touch with our innovation team.”

I don't know if ASB ever developed this type of product, because I switched banks when they wouldn't renegotiate my mortgage and haven’t heard anything to suggest they have this tool. I’m not suggesting all banks lack innovation, because they don't.

When gold was first discovered in Otago in the 1860’s, Westpac (then known as the Bank of New South Wales) rode to the goldfields from Dunedin on horseback and pitched their tents on the banks of the Clutha, becoming the first mobile bankers.

155 years later and the big red bank continues to lead New Zealand-based banks in the drive towards innovation, however, it's when we look offshore that we can see emerging disrupter brands, such as Prosper Loans, truly leading the way with innovation.

To Prosper, One Must Innovate

Prosper Loans, an American peer-to-peer lender, began life as a way for people to lend money directly to other people. Recently they launched Prosper Daily, an app designed to help users track spending habits to help optimise their finances.

What is truly remarkable is they managed to do this in just six months. This
is staggeringly fast and proves they understand what their customers want and that they need it now.

“Prosper allows people to invest in each other in a way that is financially and socially rewarding.”

Peer-to-peer lending is inherently innovative and simultaneously disruptive. Not only have Prosper democratized borrowing and lending, they’ve given customers a tool to help them to better manage their money.

They could have settled for selling a product (very bank-like) but have built on their brand strategy by delivering a product that embeds the brand into their customer's everyday lives (very unbank-like).

Shouldn't banks be striving to deliver tools with these types of features?

  • View your financial accounts and loan in one place
  • Know exactly where your money is going
  • Track the things that influence your credit score

Once in a Generational Change

On 13th September the New Zealand Parliament decided to reform New Zealand's capital markets and introduced the concepts of equity crowd funding and peer-to-peer lending to New Zealand's investment and funding landscape. It was hailed as a once in a generation change. Today New Zealand has four peer- to-peer providers and they're all doing a fantastic job at disrupting the market.

Each peer-to-peer brand has a slightly different proposition. For instance, LendMe is the only brand offering secured loans from $25,000 to $2 million. Harmoney, Squirrel and Lending Club are unsecured lenders with a maximum lending amount of $75,000. 

Prosper and the FMA understand the importance of innovation, which begs the question, why is it so difficult for large companies, such as banks, to innovate when it's so abundantly clear that they need to?

The easiest way of explain it is to understand The Resource Curse. It works like this: most companies focus on their most successful technology, rather than developing something new. They’re happier being comfortable, than hungry.

Perhaps that's what I encountered at ASB - they're just not hungry enough.

Will I give them another go? Of course, but only if they offer me a lower mortgage rate. Because that’s all they are to me, a commodity, and it appears they’re OK with that.

I wanted a self driving car to get me to work, but all they offered me a horse. And my response to that, is to say "neigh!”

Kaleb Francis is a Digital Strategist and director of brand and design agency Marque.