Collaboration, not competition – the future of banking
The continuing growth of peer-to-peer lending
Peer-to-peer lending (P2P) platforms have become increasingly popular with consumers over the past few years. These platforms match individual lenders to borrowers online, allowing people to source loans without going through a traditional financial intermediary.
Since its inception in 2005, Zopa has become the UK’s leading P2P website, facilitating over £750m in loans. And this momentum is set to keep growing. In fact, according to research by the University of Cambridge, financial transactions through online lending platforms are set to total €7bn in 2015.
P2P offering competitive rates
Part of the reason is that P2P can offer users better rates than they would get with banks. However, and perhaps more importantly, it also enables people to quickly and easily source the finance they need, entirely online.
Our research shows customers are increasingly using digital methods for their various financial needs. 82% of UK banking customers say that the quality of a provider’s online services is important to them when obtaining a new financial product, such as a loan. P2P, born in the digital age, is therefore resonating well with consumers.
Metro bank and Zopa
Last month, Metro bank announced a collaboration with Zopa. It is now providing loans for its customers through this popular online platform. This is a first of its kind deal for the UK financial services industry and it marks a vital turning point. Traditional players need to take note.
Many experts have been describing the Metro and Zopa partnership as a huge threat to the financial services industry. While this view is understandable, particularly as Metro and Zopa are well- established “challenger” brands, what this actually represents is a huge opportunity for traditional players to explore other potential partnerships.
Forming partnerships and aiming to deliver customer-focused banking
Rather than thinking of these innovative, nimble and fast moving companies as competitors, traditional players need to start thinking of them as potential partners. By collaborating and sharing customers, both parties can benefit.
Following the announcement, Craig Donaldson, CEO of Metro Bank said that the company is continually looking to work with partners, so that its customers can benefit. He explained that the partnership with Zopa would strengthen its commitment to providing a “convenient and customer-focused banking experience.”
Capitalising on the popularity of P2P
Others can learn from this example. Like Metro, incumbent banks should be capitalising on the popularity of P2P and exploring how they can improve the loan process for customers using these platforms.
And it’s not just P2P. Technology evolves quickly. Collaboration enables traditional providers to take advantage of new innovation and put a start-up mentality at the heart of their business. Partnerships can revolutionise services for customers. Banks who don’t collaborate risk getting left behind.