Freeformers and the long tail in financial services

Reading about Richard Duvall, co-founder of Egg and Zopa, I realized there can be a connection between the concept of freeformers and the long tail in on-line financial services.

In the early 2000’s Duvall led New Barn Studios, a team of former colleagues and friends that gathered in his barn to discuss emerging trends and how they impacted society. One of the trends discussed was the freeformers (coined by ethnographic researcher Bruce Davis), a group of people between 30 and 50 who want more control and freedom to do things their own way. They reject (or sometimes are forced to reject) the security of a job for life to pursue more diverse lives that give them more satisfaction and an opportunity to follow their passions.

Information technology is behind this change in attitudes and behaviors. Trust based community sites (e.g. eBay, Wikipedia, Zopa, Q&A sites, among others) gather freeformers and allow them to connect and contribute. In the same way that on-line book, music, and movie sellers/renters overcome the space limitation of brick and mortar retailers and extract value from the long tail, on-line trust based communities overcome geographical barriers and can too extract value from the long tail of users that are not served by established businesses.

Take the example of on-line financial intermediation. Borrowers and lenders connect on-line to provide financial products that are customized to each borrower/lender needs and not designed to meet the mass markets segments as defined by traditional banks. This business model also follows the three rules described by C. Anderson. 1) Make everything available: on-line financial services sites can connect everyone that reaches them, 2) Cut the price in half. Now lower it: on-line financial services don’t have much overhead and can offer a lower cost, 3) help me find it: on-line financial services match lenders and borrowers and help lenders diversify their risk.

The long tail concept applied beyond the entertainment industry can be an interesting way to think about unmet customer needs and come up with a product/service to satisfy them.