E-Commerce 2.0

Web 2.0 has been quite the hype over the past few years, perhaps too much. Much of it pertains to best practices using blogs, wikis, RSS feeds, and mashups. But not very much has been discussed - well, not enough in my opinion - about practical commercial applications other than the ubiquitous eBay and Amazon. Not anymore. Meet Zopa, the world's first social finance company. In 2005 Zopa pioneered a way for people to lend and borrow directly with each other online as part of our continuing mission to give people around the world the power to help themselves financially at the same time that they help others. According to Kupp and Anderson's Zopa: Web 2.0 Meets Retail Banking, here's how Zopa works:

(1) Zopa looks at the credit scores of people looking to borrow and determines whether they're an A*, A, B, or C-rated borrower. If they're none of the those, then Zopa's not for them

(2) Leners make lending offers such as "I'd like to lend this much to A-rated borrowers for this long and at this time

(3) Borrowers review the rates offered to them and acept the ones they like. If they are dissatisfied with the offered rates on any particular day, they can come back on subsequent days to see if rates have changed

(4) To reduce any risk, Zopa spreads lender capital widely. A lender putting forth, for instance, 500 pounds or more would have his or her money across at least 50 borrowers

(5) Borrowers enter into legally binding contracts with their lenders

(6) Borrowers repay monthly by direct debit. If repayments are defaulted, a collections agency uses the same recovery process that the High Street banks use