As I have written before, social lending holds a lot of potential in its ability to tap into the natural ties between people. Recent estimates by Gartner support this view; the research group expects that by 2010, 10% of the worldwide market for retail lending and financial planning could be controlled by social network banking platforms. Banking executives beware; the two most popular products include lending and payments, both very profitable areas for traditional players. (Mortgage mess aside)

The leaders of social banking, which include Zopa, Prosper and Lending Club, have certainly been busy. Prosper has raised $40 million from investors, Zopa attracted $34 million while Lending Club secured another $10 million to grow beyond Facebook. Membership has also been growing: Prosper has almost 500 000 while Zopa is up to 150 000. One study predicts that Americans will turn to social lending to pay off mounting credit card debts with the amount borrowed for this growing to $159 billion by 2012.

Although social lending is not new, after all people got along without banks for thousands of years, the phenomenal growth of these new financial institutions is primarily driven by young people and high net worth individuals. The Net Generation, which is comfortable interacting in social networks, is mistrustful of large banks and attracted to the altruistic aspect of peer-to-peer lending. While social lending is still a nascent phenomenon, about $647 million worth of loans were made in 2007, it is one of the faster areas of growth in financial services. Traditional banks, just like telecommunications and record companies, will have to find a way to adapt and compete in this new Wikinomics environment.