Greek Complexity

Replacing banks with... people?

A few days ago, a colleague sent out a news article by email to a bunch of us. My boss responded with:

Not resorting to hyperbole - but this is the most brilliant idea I've read in a long time.

I am being a little aggressive here, but this is the biggest threat that banks will ever see to their model.

It will take 10 years, but this IS the bank of the future.

This may well be to the consumer lending business what the ATM was to retail banking.

What was he so excited about? Something definitely worth getting excited about:

Prosper's users lend money to and borrow money from other people on the site at what the company says are better interest rates than those available through traditional financial institutions and without some of the risk that comes from typical person-to-person loans.

"We looked at eBay and said, 'Why can't we do this for money?' " said Chris Larsen, Prosper's chief executive.

He noted that consumers make, at most, about 4 percent on their savings accounts, which banks then lend to credit card customers at 14 percent or more.

"That's just a huge spread," Mr. Larsen said. "We think if you allow people to participate directly, it's a more efficient marketplace. People can make a better return on their deposits, which then become the source of credit to others."

Borrowers can also join or create groups with defined interests or characteristics that, they hope, will make them more attractive to some lenders. Prosper's group leaders receive a commission on the group's lending and borrowing activities, which they sometimes share among the group. "If the sites are able to recruit strong group leaders with strong affiliations, they shift the marketing burden to those people, who have the incentive to go after others to become part of the group."

The community aspect of the site, Mr. Larsen said, is an important component. "It's satisfying to place money in little bits with people who have stories, and in groups that you know and trust and want to support."

Link: It's Like Lending to a Friend, Except You'll Get Interest

I think this will turn out to be as big a phenomenon, or perhaps even bigger when all its implications are considered, as mortgage-backed securities were in the '80s.

I went to Prosper's website and Larsen's point about the community aspect certainly rings true. The human touch (I'm all about the human touch today, it seems!) was apparent in listings like this one:

Requested:	$10,001.00
Lender rate:	4.50%

Description

I just want to put in a new sink and john and shower.

Sprint "gets" blogging

A few days ago, I received an email from Sprint, the US phone service provider. They have started something called the Sprint Ambassador Program, in which they offer a bunch of freebies in return for, well, nothing. Here's what they wrote:

We recently launched the Sprint Power Vision (SM) Network and want to provide you with the full experience, at no charge. Sprint Power Vision Network enables customers to download data at faster speeds and experience new data products.

So what's the deal?

As a qualified participant, we will send you one Sprint Power Vision phone and provide you with six months of all-access service (at no charge). You’ll have access to the Sprint Music Store(SM) live TV broadcasts, gaming and more.  Yes, you will also have unlimited free calling and data service.

So what's the deal, I echoed in my own head. Is this a scam? Is it just spam? All they wanted in return was "your candid feedback (you decide how much and how often)".

One reason to think it wasn't spam was because the email implied that I was being invited to participate because the Sprint Ambassador team had visited my blog, and that I had been shortlisted as a result. Moreover, the email was sent to an address (blogfeedback [at] murli [dot] net) that is only available on my website and which has to be manually copy-pasted into an email. Spambots haven't harvested it so far. And combined with the fact that the email was addressed to me personally (firstname-lastname), I was fairly sure that this wasn't spam.

To find out whether it was a scam, I shot back an email of my own.

Thanks for your kind offer. I'd love to participate in the program, except that I'm not based in the US.

I may be in the US later this year and I'd be more than happy to participate then if that's possible.

In response, not an auto-reply, but an actual person. Wonder of wonders.

The upshot was that I can't participate in the program (because I'm not a US resident) but that's not the point of this post.

I found many things impressive about this entire exchange:

• I have never written about Sprint on my blog.  But I have written about telecoms. Looks like Sprint searched for blogs related to telecoms and shortlisted some bloggers to receive invitations to join the program. The very fact that they're taking blogs this seriously is impressive.
• That alone would have impressed me. But then their offer wasn't a traditional big-company marketing tactic either. Lots of freebies and not much asked for in return. (I thought Starhub did a very good job in recruiting trial users --like me-- for its i-mode launch in Singapore, and Sprint trumped even their offer.) Looks like they understand bloggers better than most people would credit big companies for. Look at the result: I haven't even taken up their offer and yet here I am blogging about them. Zero cost to Sprint and God knows what the dollar benefit has been to them so far.
• Last, the whole email exchange had a human touch to it. An actual person at Sprint (not a bot) took the pains to find relevant blogs, read through them, then manually search for the names and emails of shortlisted bloggers. Someone also responded personally within a matter of hours to my email, even though it was probably about 10 pm when I wrote to them. I think the human touch is particularly important for bloggers -- many of my compatriots are merciless in their criticism of form replies.

Well done, Sprint.

If any other bloggers received similar invitations, I'd be interested to know what their experience was like.

Guess which phone company I'm going to call first if I ever move to the US.