Kwedit Shows Potential Web2.0 Attack on Banking System

Lets start with a quick link I picked up from one of my favorite feeds: Techfuga. Techfuga follows a variety of Web startups and the financing that fuels their progress. The primary focus for the day is a silly, yet arguably ingenious startup called Kwedit. Click here for the full story.

http://www.techcrunch.com/2010/02/03/kwedit-launches-the-first-completely-unreliable-payment-network/

To be fair, Kwedit does seem a bit juvenile at first. But once you read between the lines a bit, it should become relatively obvious why this story stands out. Kwedit represents what I have called the coming Webmageddon for the financial industry. We have seen this patten for a variety of industries already. The most obvious examples include the almost dead music industry, and if one listens very closely, the screams of the print media can be heard growing fainter every day. As much as I love the idea of Apple’s new Ipad, I sincerely doubt it can become the save all  for a medium so outdated. The newspaper seems more like the stone tablets from The Ten Commandments every day.

This pattern will spread from one industry to another, as cheap collaboration and reshuffling of age old pricing mechanisms fall to the usurping power of the web. It is ambitious for one to play futurologist and predict which industry could fall next, but I know which one should go.

The banking industry has almost singlehandedly drug twenty years of relative economic stability to Hell. It may be unfair to place all the blame on banks, but it becomes more obvious every day the banks had a heavy hand in creating the conditions for the housing meltdown to almost derail the nation. Add the ever persistent rumors of Goldman Sachs market manipulations (stretching as far back as the GREAT depression itself) and you should have a populist push to punish the big banks and reduce the power they have abused so badly. Every day a new story surfaces of corruption and underhanded dealings. The New York Times printed a remarkable piece linking Goldman Sachs to the fall of the deplorable insurance turned financial firm AIG. It doesn’t take much of a mental leap to create another story between the lines of this article: one that shows Goldman’s effort to topple AIG and convert it into a money hose leading straight from the Federal Government and tax payers.

http://www.nytimes.com/2010/02/07/business/07goldman.html?pagewanted=1&partner=rss&emc=rss

I bring all of this up not in an effort to demonize the banks, but really to argue that the banking system itself is in DIRE need of a web2.0 revolution, reminiscent of both the music and print media.

Again, these webmageddons have yet to produce a tightly controlled synthesis between the traditional industry forms and the new web iterations. We can accurately infer a few things about these potential synthesis forms though. Each industry was once controlled by super firms with large amounts of capital, dictating the products (and personalities) consumed by the general public. In the wake of webmageddon, the monopolistic remnant breaks apart as the massive profit once generated depended solely on inflated prices for print and recording resources now cheapened by web exposure. Theoretically, smaller, more efficient firms should arise to provide more customized media, appropriate for the smaller regions each micro firm will serve.

Again, I am playing the futurist here, but one thing is certain. Web2.0 has the power to radically alter the market in a way fatal to large inefficient firms.Think “too big to fail” and how the web could attack these establishments  in slow, safe, completely government free ways.

Now back to Kwedit. Kwedit will not single handed change the banking market, but it is a piece in a larger trend that probably will. Kwedit allows virtual credit for virtual goods to develop slowly and without risk. Anyone in banking will tell you that risk is one of the necessities of profit within both banking and investment.  Here, a smaller firm, has established an almost risk free avenue for establishing credit, something I predicted would happen almost a year ago when the credit industry froze and threw us all to the wolves.

I know this is quite a jump, but if you do not believe me, research the micro lending trend and its recent involvement with the Haiti earth quake. If you are feeling lazy, here is a link to CNN’s story about 50 dollar microloans and their potential use in Haiti’s disaster.

http://money.cnn.com/2010/02/04/smallbusiness/haiti_microloans/index.htm

Micro lending and virtual credit have their roots firmly established. They are weak now, but with an almost risk free business platform and the collaborative innovation of the web powering their development, it is only a matter of time before they evolve into something capable of challenging the traditional big bank format.

That may be one hell of a webmaggedon. Hold on to your butts.

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