Future of Investing

Peer to peer, financial style (Future of Investing series)

close

Email a Friend

This post was originally included as part of an ebook that I published alongside the launch of my book, Tradestream, entitled “Tradestreaming and the Future of Investing”. The content was so good I wanted everyone to have access to it 🙂 .

***********

What has the financial crisis taught us? What’s changed in our risk management? Our models? Nothing. Nada. The government pumped millions into the same old banks and financial institutions, practicing the business the same old way, with the same people. Frankly, politics changed more in the last 4 years than the supposedly technologically-advanced financial industry. Obama rose to power using social networks, the power of
change and the power of the people but applied none of that to fixing the financial system. We need to use the advances in the internet, mobile, social networking and the rise of the real time web to fundamentally change the financial industry, creating more democratization, transparency, opportunity with improved risk management.

As peer to peer lending takes off, we can imagine a world where this model is extended to everything from mortgages to currency trading. Your local mortgage provider of the 1950s, who knew your employer, your neighbors and the intricacies of your local housing market so he understood the risks was replaced by abstract CDOs with zero risk-correlation to the facts of your housing markets. Those CDOs will be replaced by Facebook and your social network who will understand your risk profile better than anyone? Why can’t corporations lend money directly off their balance sheets in real time instead of depositing them in banks, earning low interest and enabling the banks to give out risky loans at a higher rate? That is certainly inefficient and screaming for disintermediation.

As I write these lines, I am reading about yesterday’s IPO of Financial Engines (Nasdaq FNGN), who uses technology and the internet to democratize the provision of financial advice to the “common man” and is up over 40% in its first day of trading. I read the FNGN article on Seeking Alpha who “gives a voice to 3000 contributors” who talk to any investor on the web about the stocks they own. Enough writing, I think I will go make a loan on Zopa, buy some Israel Shekels on eToro.com and tweet about it later.

*—> Like what you see? Hey! Don’t forget to subscribe to the free Tradestreaming newsletter for updates, tips, and special offers.

Michael Eisenberg is a partner at Benchmark Capital and has been a key figure in Internet and software investing in Israel since 1995. Prior to joining Benchmark, Michael was a partner at Israel Seed Partners for eight years. Michael joined Israel Seed in 1997 from Jerusalem Global, where he started and headed the firm’s successful investment banking group and partnership with Montgomery Securities.

0 comments on “Peer to peer, financial style (Future of Investing series)”

Future of Investing, Podcasts

Broadhaven Ventures’ Michael Sidgmore on global trends in embedded finance

  • The future of financial services will be driven by non-financial companies that add a financial services layer to serve engaged, frequent users.
  • The pandemic will accelerate the digitization of underlying tech infrastructure and consumer habits, causing long-lasting behavioral shifts.
Suman Bhattacharyya | July 21, 2020
Future of Investing

During pandemic, Personal Capital sees customer inflows, positive feedback for recent rebrand

  • Investment platform Personal Capital rebranded in October 2019.
  • The results of the rebrand, a new marketing campaign, and COVID-19 are all contributing to the firm's growth.
Zoe Murphy | April 23, 2020
Future of Investing

2019: Year of the fintech inflection

  • The fintech market is undergoing changes as investors tweak their strategies.
  • Growth stage companies are seeing a bigger share of the pie, as are emerging markets.
Zoe Murphy | February 19, 2020
Future of Investing, Podcasts

Titan’s Clayton Gardner: ‘We want to make sure we’re building cars, not faster horses’

  • While most robo-advisers have embraces passive investment strategies, Titan has taken a contrarian approach.
  • Its clients turn to the investment app for reasonably-priced hedge fund strategies.
Zack Miller | October 28, 2019
Future of Investing

JMP Securities’ Devin Ryan on the impact of free trading on financial services

  • Over the past few weeks, major brokerages have eliminated brokerage fees.
  • Devin Ryan, MD at JMP, joins us to discuss what the future of financial services looks like.
Zack Miller | October 21, 2019
More Articles