Could Facebook wipe out the banking industry?

In short, yes.  It's a real possibility.  Zopa have been hugely impressive and have proved that peer to peer lending can and does work.

The problem for the Financial Services industry, is that it is in a state of denial on the impact of Social Media.  Whilst it agonises about the Retail Distribution Review and other regulatory issues, it's the Internet that is the real threat to the whole industry as consumers themselves increasingly start to hold the power.

Philip Calvert
www.ifalife.com

A scary prospect. For consumers as well as banks. Facebook hasn't the best record of managing simple opt in/opt out privacy settings, and many social network users are either confused or sloppy with their privacy settings.

Danah Boyd touches on these issues at - http://www.danah.org/papers/talks/2010/SXSW2010.html

Don't you just love the leader...'wipe out the traditional banking industry'? Yeah right! Let's put this into perspective...the 'banking industry' is more than just peer to peer payments and Facebook is, from a trust perspective, on a par with www.takeyourmoneyandrun.com and www.mafiaholdings.com. Why on earth would anyone want to place deposits with Facebook, for example. And, remember this...a bank is a regulated deposit taking institution! So for heavens' sake, get real and put this alongside Paypal! Oh! Will it 'wipe out the maybe not yet traditional Paypal industry' too?

Shame!  I was hoping to glide to the bank in my new flying car.

'Potential to wipe out the banking industry' would be an over optimist scenario. Consider this - Facebook has an user base of 8 Mn in India which is 10% of the wired population while India's internet penetration stands at 7% of its population. In this scenario, Facebook loses its relevance in the unwired part of the world. Banks have access to this world and this is unlikely to change in the near term.

Having said that, Zopa's success has shown us that the trust of the community can be built on the web and this should not remain an area of concern for Facebook. But what remains to be seen is whether Facebook can win the regulators in a cross-border scenario.

Dushyant