Steadfast FinancesWhat Industry Could You Bankrupt if You had 500 Million Users?

What Industry Could You Bankrupt if You had 500 Million Users?

Filed in Banking , Business Trends , Peer to Peer Lending 15 comments

I ran across this clever, or ghastly if you work in the banking industry, idea from Thomas Power from Ecademy.com.

What if Facebook became a bank?

If you’re a banker, I’d bet the Bank of Walmart idea is looking pretty good about now since the Internet is steadily putting the middlemen out of business.

But think about this for a second…

If Facebook could persuade just 1 in 10 of it’s 400 million users (as of 03/15/2010) to deposit just $1000 in the Bank of Facebook, you’re talking a cool 40 Billion dollars.

Not exactly game changing when taking in the enormity of the financial industry as a whole, but certainly not chump change either.

But 40 Billion isn’t anywhere near enough to hurt the banking industry. Not by a long shot. It might get some media attention since they’ll lose the spread between checking/saving rates and mortgage rates, but it would take a capital loss much larger than 40 Billion to do any serious damage.

However, since the number of Facebook users is growing by 100%+ annually, Facebook users are more web savvy and comfortable with Internet banking, and Facebook can probably get a much better conversion rate than 10% of its users to switch to the Bank of Facebook, you’re talking about a substantial change to the status quo of the global banking system as it continues to grow and mature.

Perhaps even more progressive (or scary from your point of view), is what if some of this money was devoted to social lending (similar to Lending Club and Prosper). The need for an “old school” credit card issued by a Too Big To Fail bank is considered obsolete because you would rather share the wealth with your Facebook brethren than a group of fat cat bankers.

All you would need (in theory) is a pre-approved Facebook line of credit, with a fixed interest rate, and a group of friends (or investors) who wanted to indulge your consumerism. All they ask in return is a 10% return on their investment after paying for your stuff.

Of course, I might be in entrepreneurial dreamland expanding on Mr. Power’s idea that may or may not become a realization.

Then again, when you have an “army” of 400 Million followers/users, you can probably use, or leverage, them to do just about anything you want…

Like kill off an entire industry.

Not to be facetious, but it would be ironic if Facebook did actually move forward with this business plan considering that the 2000 to 2009 decade was the rise of Too Big To Fail, but the 2010 to 2019 decade could be known for the  Too Big To Stop social media behemoths.

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Posted by CJ   @   16 March 2010 15 comments
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15 Comments

Comments
Mar 16, 2010
8:23 pm

You need to get a commission on any of this. Then YOU would be the richest man in the world.

Mar 16, 2010
9:07 pm

I’d rather prefer something like this to happen between Twitter and microlending. Facebook is too scary to imagine as a bank:) – would they post status updates each time you make a withdrawal? ;0

Mar 16, 2010
9:32 pm

What an excellent idea. The Lending club idea is already gaining speed is it not? Makes complete sense to me, get a better return, or receive a lower rate on your loans. What’s not to like?

Mar 17, 2010
12:41 pm
#4 RJ Weiss :

Very interesting concept. The fact that they are going to have 1 billion users by 2012 is amazing.

They can take down out almost any industry. The first thing that pops into my head is the real estate industry. You can find homes through facebook, contact buyers, get a mortgage right through facebook. Very interesting video.

Mar 17, 2010
1:41 pm
#5 Matt SF :

Supposedly, Facebook will be cash flow positive in 2010, but I agree, this sounds much more efficacious than selling lame advertisements.

Mar 17, 2010
1:42 pm
#6 Matt SF :

Ha! It’s not my idea unfortunately. I just expanded on the idea. I appreciate the sentiment, though!

Mar 17, 2010
1:43 pm
#7 Matt SF :

I’d wager you could deactivate the status updates, but those might be welcome if you’re the type of user who routinely gets hit with overdraft fees. An automatic email is sent to you when you’re below $100.00 or something like that.

Mar 17, 2010
1:47 pm
#8 Matt SF :

Lending Club is growing so fast it’s got more investors willing to invest money than it has loans that need funding. Granted, they reject a large percentage of loan applications, but that’s still a killer metric.

I would imagine the P2P/social lending space still has tons of room to grow. Once it becomes more mainstream of course.

Mar 17, 2010
2:42 pm
#9 Matt SF :

I was thinking some similar for a future post, but I’d bet they could take out sites like Realtor.com within a few years. I don’t know if they could kill off Realtors since they have the “boots on the ground” advantage with face to face customer service, but could possibly eliminate the outrageous 6% commission fee.

Mar 18, 2010
12:07 pm
#10 Tom Randskin :

Interesting idea… what about if Google decided to bankrupt an industry?

Just think of the dip in the SatNav providers shares when Google announced their built-in map in their cellphone. Most of them haven’t yet recovered.

And think of all the services from G that we are using on a daily basis. Knowledge is power and they know A LOT about us.

Mar 24, 2010
3:18 pm
#11 kt :

i wouldn’t give them a damn cent. they would violate terms of service and make all my private information public because according to the facebook guy mark something “the age of privacy is dead”

Mar 31, 2010
11:40 am
#12 Victorino :

Why not start with a game application, entitled FaceBank. This will somehow give a hint, on the idea of social banking. But honestly, a $1,000 dollar on 10% of FB users? That’s crazy, since FB users came from different countries. A thousand may be enough for others, but may be heavy for other countries. Also, most of FB users are teenagers or students who do not yet earn an income – to deposit in FB.

Mar 31, 2010
11:58 am
#13 Matt SF :

FaceBank is a good name for it… maybe you should copyright that! (hint hint)

I gave the example of $1000 as a hypothetical situation. I think that’s a fairly conservative estimate considering Facebook can probably put together a pretty good marketing campaign and pull in 1 in 10 users who want to deposit their money.

While many of the early users are young kids w/ little to no income, Facebook is growing up. They have said several times that their fastest growing demographic is the 35+ crowd, so they have the ability to deposit at least $1000, and maybe more. Plus, nearly everyone I know in the 21 to 40 crowd has a Facebook account, so this backs up their stats.

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