Thanks to Nishad Ramachandran for coining this phrase in what the Economist has been calling Branchless banking. This is the notion of depositors and lenders finding each other through internet, and eliminating the need for traditional banks.

I read a preview of Nishads paper that is being developed for a client, and it frames the concept beautifully. The reference I especially liked is to Payattu, and its beautifully written to capture the essence of the concept.

"As a child, I would trail my uncle to many of the Payattu invitations he received. In a Payattu, one member of a community sent out invitations to friends and relatives asking them to come to a local tea shop or restaurant. The invitees turned up and contributed a small sum of money. An accountant sat at the entrance of the shop, collected the money and made a note of the contributed sum. The invitee met up with the host of the Payattu, indulged in some refreshments that had been arranged and left in a few minutes. The person who organised the event ended up using the money he collected to start some project – like financing the construction of a house, a marriage …..The next time this person is invited to a Payattu by one of the attendees, he looked up his little notebook and repaid the same sum that was contributed."

The paper will go on to reference, Skype, Egg, Ripple, and Zopa, most of whom have been referenced here at one point or another.

The key is how internet facilitates the meeting of depositors and lenders, and the concept of trust has already been proven by the eBay model.

So officially, and with Nishads agreement, I have opened a category for Open Source Banking, and will re-categorise the earlier posts.

UPDATE:

Here is the full article over at OneAngryCustomer 

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