Social banking platforms - such as peer-to-peer (P2P) lending networks like Zopa and Prosper - will grow to control 10% of the worldwide market for retail lending and financial planning by 2010, according to research by consultancy Gartner.
The consultancy defines 'social banking' as a combination of trends - such as green practices, social entrepreneurship, P2P lending and financial planning via social networks - with banking products and services.
Gartner says non-bank social platforms are "pushing aggressively into banking and investment services" and the threat is particularly pronounced in two businesses - lending and payment.
P2P lending platforms like Zopa, Prosper and Lending Club have raised significant funds from venture capitalists over the last two years. US outfit Prosper has raised $40 million in in financing rounds whilst UK-based rival Zopa has secured around $34 million.
Meanwhile in May last year Richard Branson's Virgin Group bought a majority stake in Massachusetts-based CircleLending, a provider of loan administration services that specialises in managing loans between relatives and friends.
Gartner says the venture capital investment and Virgin USA's acquisition point to the growing prevalence of these services and increasing consumer interest in this area.
"Consumers are generally spending more time in social networks which increasingly form part of consumer purchase processes for new products and services," says Alistair Newton, research vice president at Gartner.
The US and Western Europe will initially see the greatest uptake of these services, mainly because the regions already have a developed banking market and widespread broadband, as well as the potential for increasing use of wireless communication systems.
Stessa Cohen, research director, Gartner, says: "Social banking will emerge first where societal cultures have high levels of acceptance for social welfare and potentially where the underserved or unbanked client segments need capital and market access."
However Gartner warns banks not to attempt to copy social banking practices, unless they can clearly establish a strategic intent centered on social welfare, as opposed to traditional commercial return. Instead, banks should look to partner financial social networks, offering capabilities like transaction processing and risk management.
Several credit unions have taken this approach in the US, teaming with Zopa to offer person-to-person loans to prospective borrowers.
Gartner also urges banks to invest in behavioural analysis and predictive software so they can better understand and model the changes in customer behaviour that are driving the move towards non-bank providers.