The launch of an eBay-style banking website this week, where users lend to and borrow from each other, is the latest step in what is being seen as a quiet consumer revolution.
By Jonathan Duffy
BBC News Magazine
Strip away the peripherals from eBay, those layers of functionality that help its millions of loyal users navigate around the site, and what are you left with? A bunch of people selling things, on one side, and another bunch of people, on the other side, wanting to buy.
Unlike most of its competitors eBay does not stock anything. It merely facilitates an exchange by putting buyer and seller in contact with one another (and, for the privilege, takes a slice of commission on each sale).
In e-commerce circles it's widely seen as the perfect business model - a sort of physical manifestation of the peer-to-peer (P2P) networks, such as Kazaa, that allow online sharing of music and movies. The bosses at eBay need not dirty their hands with tiresome things like stock management, distribution and after-sales service - they leave that to us, the users.
This week saw the latest twist on what's come to be known as the "eBay model" with the launch of Zopa - an online loans service that works in a similar way. Anyone with some spare cash can offer it up for a loan, through Zopa. Lenders set their own interest rates and can choose which borrowers to lend to, based on their credit rating.
Borrowers, meanwhile, can pick a rate that's right for them and because Zopa is simply assisting the transaction, not lending its own assets, it claims to take a smaller cut (1% of the amount borrowed) than a bank. Safeguards are built in to help prevent lenders being fleeced and the whole outfit is sanctioned by the FSA - Britain's financial services watchdog.
Zopa hopes to tap into the public's suspicion of highly profitable banks
Both sites exploit the internet's power as a matching tool - its ability to bring together geographically dispersed people with a common interest.
So far, so what?
From the earliest days of the net, pioneers championed its potential for shaking-up established orders. An early buzzword was "disintermediation" - the net's promise to cut costs by wiping out middlemen and matching consumers with suppliers. So, today, travellers book flights directly with airlines rather than travel agents.
But with the likes of eBay and Zopa the internet is the middleman, a valuable go-between that matches millions of individual buyers and sellers.
Such sites owe their success to a snowball effect - the more people who use them, the more they have to offer and so the more attractive they become to other users, says Will Davies, a researcher at the IPPR think tank.
For them to take off they require a critical mass of members, which probably explains why although eBay has been around for a decade it's only recently started to seed itself in the mass British consciousness, as millions of Brits have embraced the net as another everyday tool.
"Internet penetration is the key to the success of these sites," says Johan Brenner, of venture capitalists Benchmark Europe, which has invested in Zopa and several other P2P sites.
The eBay model is starting to prove itself elsewhere, threatening to revolutionise consumer society. Bookmakers are being challenged by the British site Betfair, which enables two people, anywhere in the world, to bet against each other. Betfair takes a slice of all winnings, but this is less than a bookies' commission.
Another British site operates in an extreme fringe of consumer society by providing an online exchange for sex workers and clients. Suddenly, the pimp is redundant.
A cornerstone of these P2P sites is trust, says Will Davies, who notes the similarities between Zopa and the credit unions of the 19th Century. Where these ensured trust among investors by staying local, the eBay model gives users a reliability rating.
Small ads imitator
"The technology records past behaviour so users can trust each other in future transactions," he says. "It's one of the internet's social functions - to instil trust in one-off interactions which would be lacking in a face-to-face environment."
Gumtree.com co-founder Michael Pennington would disagree. It strips back the eBay model to its rawest form, offering an online equivalent of small ads, with sites limited to geographic areas.
EBay started as a trading site for collectors of toys and novelties
Having started in London, advertising flatshares, it runs sites across 10 UK cities and has expanded to Australia, New Zealand, South Africa and the Middle East, and includes job ads, lonely hearts and "stuff for sale".
Unlike eBay, transactions have to be done face-to-face - something that appeals to users' sense of trust, says Mr Pennington. But it relies on the same principle - a community of users. Instead of online rating, Gumtree keeps users loyal by scanning all adverts that go online, with an eye to weeding out potential cons and come-ons.
"It's important to get real adverts from real people. By raising the bar and making it difficult for scammers, they're inclined not to bother and go elsewhere," says Mr Pennington.
In a similar vein is FreeCycling - an American-inspired site whereby users give away disused household goods for free.
Johan Brenner believes the eBay model could spell a consumer revolution. "We've just scratched the surface over how much trade we are going to see on the net and you will see a lot more [eBay-type] sites."
So where next for the eBay model? Mr Davies foresees a future for labour markets, with self-employed folk - plumbers, decorators, etc - offering their skills through an eBay-type exchange, and being subject to user rating. Keen.com is a perhaps an early example, with psychics and tarot card readers offering their services, with a per-minute consultation rate that reflects user feedback.
The man behind Zopa, Richard Duvall, believes his model will work because it brings the benefit of wholesale markets to ordinary people. Where companies once loaned from banks, they now go to the bond markets where lenders tender for their business. The Zopa model does a similar thing for anyone who wants a loan.
"It's all about being in control," says Mr Duvall. "As a lender you choose your risk and what return you want, then it's a case of does anyone out there want to meet you on those terms."