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Can you beat the banks?

Posted on 18 Jun 2009 at 16:31

The banks of the future?

Are these new internet money-lending services a serious threat to the likes of Barclays and Lloyds? "Peer-to-peer is not about to completely destroy the banks, but it isn't something banks can afford to ignore," said Alistair Newton, research vice president at Gartner's banking and investment services team. "It will start taking small yet noticeable portions of a bank's business. It's going to start chipping away at some profitable areas. For every bite, it takes away a lending and depositing opportunity."

However, caution on these sites is advised, particularly if you're lending money to others, as you aren't covered in the same way as a bank would be if something goes wrong. And even if you are only borrowing £100, you need to make sure you're able to pay that back, or else it will tarnish your credit rating.

It's also worth noting that these business models are so new that they don't yet come under the remit of the Financial Services Authority. When we asked its opinion of these services the FSA told us it "would not be appropriate to comment directly on the issues you raise".

Yet the enthusiasm of these entrepreneurial sites and the fact that they, too, dislike banks, is a breath of fresh air. "Banks looked invincible a few years ago. I don't think they cared about customers and I don't think they care about customers today," Damelin said. And similarly, Andrews claimed "underneath it all, banks have destroyed consumers' faith in them as institutions to either do the right thing for consumers, or even for the banks themselves. I think people are incredibly cynical and we're an unexpected beneficiary of that."

Author: Kim Gilmour