Could Facebook Sink the Banking Industry?

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Here’s an interesting thought for you, courtesy of Thomas Power from Ecademy.com. If Facebook could persuade 10% of its 400 million users to deposit $1,000 in a supposed Bank of Facebook, the company would have $40 billion in deposits. Is Facebook Bank a pipe dream — or could it really happen?

Power thinks so. In a March 28 video now making its rounds around the Web, Power postulates that Facebook will have approximately one billion users by the end of 2012. With a captive audience of that size, Facebook, according to Power, can sell just about anything — cars, travel packages and even bank accounts.

Facebook wouldn’t have to create a “big bang” strategy to take down banks, Power says, the process could be incrmental. For example, the social networking giant could start by offering peer-to-peer lending services to Facebook users. The peer-to-peer market, which links lenders and borrowers online, is estimated to climb to $5.8 billion by the end of 2010, according to the Federal Reserve. Facebook would be ideally positioned to offer loans to its army of users, Power adds.

Power says that it would only take 10% of all Facebook users to get a good-sized banking operation up and running — even though $40 billion, while a good chunk of change, wouldn’t exactly threaten bigger banks like Bank of America (Stock Quote: BAC) and JPMorgan Chase (Stock Quote: JPM), both of which have more than $1.5 trillion in total assets (for a list of the largest banks in the world, as measured by total assets, check out this Web site.)

What a Facebook Bank could do is threaten global banking’s status as the world’s largest financial middleman, where it acts as intermediary (via credit and debit card services) between consumers and businesses.

With the growth of online shopping, consumers could conceivably remove banks from the consumer retail experience in favor of handling their transactions via Facebook (where they would have a line of credit at a fixed interest rate). Power believes the huge membership numbers would give Facebook users plenty of clout when it comes to discounts and bargains. Imagine Facebook approaching Ford Motor Company (Stock Quote: F) with 1 billion potential customers asking for a discount on new cars and trucks. Power says that for all their might, banks don’t possess that kind of clout.

It’s an interesting theory and one that is well presented by Power. Check out the video and see for yourself. And if you happen to work for a bank, it could be a glimpse into a future where consumers don’t want or even need your services.

Too big to fail, indeed.

—For the best rates on loans, bank accounts and credit cards, enter your ZIP code at BankingMyWay.com.

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