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Consumers are increasingly turning social lending communities on the Internet,
according to a new study.
While the study, "Internet-based Social lending", by the Social Futures
Observatory, found that people who used high street banks thought they were
necessary for general everyday banking, 49% of those polled felt that banks do
not have their customers' best interests at heart.
In addition, 81% agreed that the banks are self interested and 76% strongly
agreed that the banks are greedy.
The study found that social lending is growing in popularity, much like other
social networking sites that have seen huge growth.
The reasons for this are due to the increased transparency and connectedness
with others that comes from lending to and agreeing loans amongst like-minded
people.
Just as importantly, it offers people strong financial benefits - higher rates
of return on investment for lenders, and a lower rate of interest than is
offered by banks for borrowers.
The study looked at a number of Social Lending players, and used Zopa,
the online marketplace where people meet to lend and borrow money, as a case
study.
Zopa, which was set up by many of the team that launched Egg, currently has
105,000 members in the UK.
Professor Michael Hulme, author of the study, explained: "Traditional banking
emerges from this report as almost some form of necessary evil.
"For most people banking does not provide any form of rewarding or valued
experience it is simply a necessity.
"In contrast to this the Community Sites we looked at appeared to offer a much
deeper appreciation of the individual that went far beyond the actual
transaction."
James Alexander, co-founder and CEO of Zopa, commented: "We've seen a strong
return to ethical values in recent times, with many of us concerned about the
impact we, and the organisations we deal with, are making on the community we
live in.
"Lending and borrowing money from real people online, through marketplaces such
as Zopa, allows people to get a much better financial deal than what's on offer
on the high-street.
"People are already seeing the benefits - for example, those lending at Zopa
have since launch received about a 50% better rate of return on money they've
lent out than if they'd left their money in the best savings accounts such as
ING Direct or Egg."
According to the survey, 64% of people who use high street banks felt it was
important that their banks provide a service that enables social interaction and
community participation, yet only 13% felt their bank significantly enabled
either of these things.
Additionally, 56% said that the more social and interactive features of Social
Lending would be a significant factor in their decision to use a Social Lending
scheme and 18% stated that investing in people rather than institutions would
motivate them to use Social Lending marketplaces such as Zopa.
Source: Getting Paid
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