LendingClub just announced that they surpassed (barely) $1M in loans in their first 100 days of operating on Facebook.

For those of you not too quick with the math, that averages out to be $10,000 per day in loans. Of course, the trajectory is ramping up from $0 on day 1, so if we assume a linear growth trajectory (which given the chart LendingClub put out is pretty accurate), that works out to be $20,000 of loans on day 100. And then more the next day, and the next day, and you get the point.

Let me say that again, $20,000 in loans a day via the new Facebook channel with NO BANK INVOLVEMENT.

One question to think about is did these loans take away from loans that normally would have been done by a bank or credit union ? Or were these loans that would never have made it that far ? There were a total of 172 loans totaling just over $1M. Again, doing the math, the average loan was a little over $6000. This is not chump change, but also not that worthy of a bank getting involved in. Likely alot of these loans just never would have happened prior to the P2P lending phenomenon since the borrower would likely never had approached a bank in the first place.

Currently on LendingClub, there are already 683 registered lenders, meaning they have passed some qualification and know the risks.

Is this something for banks and credit unions to worry about ? Absolutley.

This has the classic tell-tale signs outlined in the great book Innovators Dilemma (by Clayton M. Christensen). The main point behind Innovators Dilemma is that when new things come out, they start small, and are hence universally poo-poo’d by the establish players. In the book, Christensen follows several industries where up and coming technology was ignored by big players because it was just a nit. Well, over a few years, that nit would each their lunch from the bottom up. It’s called a dilemma because the big players are wired to ignore these nits (after all, it may just represent 0.01% of the market at the start). They see the threat, but just can’t imagine it will ever amount to much. And then they get slammed, normally faster than anyone could every have imagined.

I think this LendingClub data should serve as a global wake up call for banks and credit unions. Now once everyone is awake, the next step is figuring out to make your own hay out of the p2p lending phenomenon.

Oh yeah, one more key point from Innovators Dilemma. You’d think a big player could just do the same thing as the small up and comer, and then just use their established place in the market to slam the small player. Ah yes, sounds great, but the problem is the new technology always has a lower cost and smaller margins, meaning the big player with their current business model and expense structure just cannot copy the small player without flat out losing money. And so the slow death spiral begins. If the big player is a 1 market company, this can literally be the beginning of the end. An example is SGI (Silicon Graphics), the vaunted Unix workstation maker of the 1990’s, literally wiped out in a few years by PCs, all the while, SGI thinking “PCs can never be workstations”.

Second Life has it’s own real estate, currency, and exchange rates. Basically an entire second economy exists in Second Life. Up until now, if you wanted to buy something in Second Life, you needed to pay upfront in L$’s (Linden dollars, the Second Life currency). If you did not have enough L$, you could get more by purchasing them in various ways (like with a normal credit card).

I guess this process was kind of a pain, because now Singapore based FirstMeta has launched a full featured credit card that operates directly with the L$ virtual currency ! That’s right, you can now buy things in Second Life using your FirstMeta credit card and deal totally in L$ thru the whole process.

The terms would be hard to swallow for a real currency based credit card. The card comes in a basic and gold variety, with the gold card limit being $L10,000 (or about $37 at the current exchange rate). The interest rate for the gold card is 0.13% per day, which works out to around 50% per year ! Ouch, good thing we are talking about low dollar amounts.

What’s really interesting is how full featured the card is, and by this I mean they have a rewards program that earns you 0.09% per on your spending, not bad.

So what’s the point of all this?

Think of it as experimentation. There is a good chance this will flop, and a small chance that this will succeed in a big way. These things are very hard to predict. This is one reason you see so many new things showing up all over the place. It’s relatively easy to create some new technology or business model and throw it up on the internet and see what happens. Everyone has learned that predicting success is tough. Just look at all the Youtube skeptics and naysers who basically thought Youtube was doomed because of high bandwith costs. Well, just 9 months into Youtube, they are bought for $1.6B (not L$). The model these days is spend more time doing and less time stewing.

Oh, get this, they even have ATM machines located in Second Life!

It seems Jason Knight, the CEO of Wesabe (the social network meets Quicken service) likes to say that Wesabe does not compete with banks and credit unions. Sure, Wesabe is not competing for deposit dollars or loans, the bread and butter of banks and credit unions. But Wesabe is competing for the users attention and eyeballs, certainly a hot commodity these days.

If someone is using Wesabe to look at the account data from bank XYZ, then that means they are not using bank XYZ’s website, which means bank XYZ is missing out on chances to market to their own customer! What’s more, bank XYZ slowly fades away in importance, just becoming an “institution” in Wesabe. This is call commodization, and it is’nt pretty for banks and credit unions.

And did I say Wesabe is not competing for loan dollars? This is pure speculation on my part, but it certainly makes sense. What do you get when you combine the social/community/budgeting aspects of Wesabe, with the peer 2 peer lending aspects of sites like Zopa, Prosper, and LendingClub? Well, I think you get Wesabe competing directly with banks and credit unions. If I had to guess where Wesabe is channeling some of their VC cash, this would be it.

disclosure: Andrew Taylor is a principal of Jwaala

Summarized version: it did’nt work and my screencast hopes were dashed

So I started out wanting to do a screencast explaining TD Canada Trust’s “SplitIt” Facebook application. Sounds simple enough right ?

First I log into my Facebook account and go to applications. Get this, there are more than 90 applications in the Money category! Too many to scan thru, so I use the search box and search on “splitit”. Nothing found. Then I search on everything else I can think of “td”, “canada”, “trust”, “split” etc. Still nothing? very strange.

So then I go searching for SplitIt or even just the word Facebook on the TD Canada Trust site. Again nothing. So I figure their search just must not be any good, so I point Google at there site by searching like this, still zip.

Finally, I just started searching the internet and landed on the mynameiskate blog, and she had a direct link to the SplitIt app on Facebook ! Yippee, we are cranking now.

Here is the enticing text (bolding removed) describing what SplitIt does:

Welcome to the SPLIT IT by TD Canada Trust application – a no-hassle, budget-sharing tool that enables you to share bills with your roommates. SPLIT IT makes it easy to determine who owes what, view your balances, and keep on top of your payment dates.

It’s easy to use: Invite your roommates to participate and start sharing bills and expenses such as rent, water, gas and food!

The TD Canada Trust SPLIT IT application appears on your facebook profile, but ONLY YOU can see the bills. No one visiting your profile will be able to see any financial details of your SPLIT IT account.

And here is the snazzy error message I get when I try to use the application:

Errors while loading page from application

There are still a few kinks Facebook and the makers of SPLIT IT by TD Canada Trust are trying to iron out. We appreciate your patience as we try to fix these issues. Your problem has been logged - if it persists, please come back in a few days. Thanks!

I waited 5 days and tried again. I tried another browser. I tried another machine. I tried another Facebook account. All DOA with TD Canada Trust SplitIt.

And this brings me to a bit of advice about lumbering into social networking. By all means do it, but keep these things in mind:

• keep it simple - one of the most popular Facebook apps is sticky notes, simple simple simple
• try to make it viral - SplitIt did this right, adding friends to split bills, very social
• stay the course - don’t just abandon something and leave the carcass
• plan for success - but at the end of the day realize that much is out of your control (we are talking about social networking moths, no telling what light source will attract them)
• don’t hide - why can’t I find ANYTHING on SplitIt at a TD site ?
• abandon “properly” - leaving carcasses, or just fading into a blackhole are not cool, leave an explanation, ask for input, anything but an error message for the next 3 years

Anyone else out there have any better luck with SplitIt ? just leave a comment and will add an update to this post. I would still love to do a screencast about this app!