I like the idea of open source banking. Today’s roiling financial markets are creating opportunities for technology and new capital sources to rewrite how money flows. By pushing for an open source model we could end up with advantages driven by transparency, networking, and robust testing of business models.
So what happens when banks actually bid on your savings account? Looks like the Dutch are about to find out. The auction model is being tested by www.sparbod.com (In Dutch, unfortunately, here is a bit more information.) You post how much you are willing to save and banks ‘bid’ on your business.
Granted, this is probably only a marginal improvement over the old ‘Get a Toaster’ approach. But it does allow for more personalized and aggressive bidding for your business. It continues the attack on geography which still limits a lot of competition for savings. (A twist on the Lending Tree approach to mortgages, a system I always felt was limited by the size of the associate banks in the system).
What this model may do is level the playing field between big national and small regional banks by reducing the cost of identifying and marketing to profitable customers in the industry. In one fell swoop the platform attacks geographic and size limitations.
As the approach gains hold, non-banks may also be able to get into the mix with clearly stated risk differentials and appropriately higher payouts.
Seems like a step in the right direction.