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Gartner Says Social Banking Platforms Threaten Traditional Banks for Control of Financial Relationships

New Technologies, Ethical Trends and Rise of Social Networking Set to Change Industry Dynamics

(PresseBox) (Egham, ) Non-bank competitors are pushing aggressively into banking and investment services, threatening to undermine banks in the financial relationship, according to Gartner, Inc. The threat is particularly pronounced in two businesses that are at the very heart of banking, namely lending and payment.

Gartner predicts that by 2010, social-banking platforms will have captured 10 per cent of the available worldwide market for retail lending and financial planning.

Social banking* is the combination of social trends, such as green practices, social entrepreneurship, and peer-to-peer (P2P) lending and financial planning via social networks, with banking products and services. Venture capital investment in financial social networks (FSNs) such as Zopa, Prosper and Lending Club, as well as Virgin USA's acquisition of a majority stake in CircleLending point to the growing prevalence of FSNs and increasing consumer interest in this area.

"This combination of business, non-profit organisations and social justice is being bolstered by general consumer trends and social causes that appeal to consumers to shop ethically," said Alistair Newton, research vice president at Gartner. "In addition, more consumers are generally spending more time in social networks which increasingly form part of consumer purchase processes for new products and services."

Gartner expects social banking to initially take off in geographies with a developed banking market and widespread adoption of broadband and potentially wireless communication systems. "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," said Stessa Cohen, research director at Gartner. "So we are likely to see this trend first in Western Europe and parts of the United States."

Gartner advises banks:
- Not attempt to replicate social-banking platforms unless they can clearly establish a strategic intent centered on social welfare, as opposed to traditional commercial return. Instead, banks should identify opportunities for partnerships with FSNs, providing banking capabilities such as transaction processing and risk management that are often lacking or insufficient in FSNs.
- To urgently invest in customer behavioral and segmentation analysis and re-engineer business intelligence models so that they can better understand the demographic changes taking place in the market.

Note to Editors*

Social banking should not be mistaken for charitable giving. Rather, it combines the social trends in networking communities of interest with financial products, services, capital and market access for a return on investment and social benefit.

Gartner UK Ltd

Gartner, Inc. (NYSE: IT) is the world's leading information technology research and advisory company. Gartner delivers the technology-related insight necessary for its clients to make the right decisions, every day. From CIOs and senior IT leaders in corporations and government agencies, to business leaders in high-tech and telecom enterprises and professional services firms, to technology investors, Gartner is the indispensable partner to 60,000 clients in 10,000 distinct organizations. Through the resources of Gartner Research, Gartner Consulting and Gartner Events, Gartner works with every client to research, analyze and interpret the business of IT within the context of their individual role. Founded in 1979, Gartner is headquartered in Stamford, Connecticut, U.S.A., and has 4,000 associates, including 1,200 research analysts and consultants in 80 countries. For more information, visit