Notes From FinovateStartup 2008

Congrats to Jim Bruene from NetBanker. FinovateStartup attracted a great group of attendees (including representatives from financial services firms, analysts, bloggers, consultants, and vendors), the venue was good, and the format was refreshingly different.

While the presenters represented a wide range of firms, they did fall into a few broad groups, including:

Mobile finance.
There were five firms offering mobile finance applications (one of them, Bling Nation, gets my vote for best name of the day).

My take: I’m no expert in mobile technology, so I won’t comment on the quality of their technology.

But I do study consumer behavior, so I will say this: Who needs this stuff?

One presenter’s use case was a consumer paying a utility bill with a cell phone. Let’s back up a second — how many people get their utility bill on their cell phone? Right, nobody. So what’s the scenario for why this would happen? Must be somebody walking down the street and thinking “Holy crap! I forgot to pay my utility bill and now they’re going to turn off my heat! Oh, good thing I’ve my handy dandy cell phone with mobile finance capabilities in my pocket. I’ll just push a few buttons, and….phew. Bill paid.”

Another presenter used his cell phone to send $100 to himself, and convert those dollars to euros. Oh great, not only another once-in-a-millenium example, but one that hurts the economy by moving dollars out of the economy.

A lot of this mobile finance — as it relates to retail, consumer-focused applications — is technology for the sake of technology. Yes, people would like to check their account balances, or move funds from one account to another with a cell phone from time to time. But guess what? They can do that today. It’s called the IVR. And I’d be willing to bet that you press fewer keys with the IVR than the mobile finance app.

I do believe, though, that the potential for mobile payments is very real. But it’s not about paying bills.

Social lending. Six firms in this space presented — two specializing in student loans (GreenNote and Simple Tuition), two of them general peer-to-peer lenders (Prosper and Loanio). In addition, there was Wonga (as in “I’m tired, and I wonga home now”), which is, as best as I can tell, a payday lender (fyi, the picture that the presenter displayed of himself standing in a UK sex shop was priceless). And then there was Zopa, which you better not refer to as a peer-to-peer lender or the Zopa CEO will come beat you up.

My take: GreenNote’s approach left me baffled. A student adds “lenders” and then GreenNote sends out “pledge requests” to raise funds. HUH? Why would I need GreenNote to send emails to people I already know? Who asks other people to fund their (or their kid’s) college education? All I can say is nobody I know better ask me to fund their kid’s college education. How awkward would that be? And why wouldn’t someone looking for funds just use a general site like Prosper?

The winner in this category — and, in fact, one of the best-in-show winners — was Zopa. Personally, I think Zopa has the model that will ultimately prove to be the winner in this space. Why? Because, unlike the other firms, Zopa doesn’t disintermediate existing FIs. It’s win-win-win — for FIs, consumers, and Zopa. I think a lot of consumers — both on the borrowing and lending sides — will be drawn to Zopa than to other social lending platforms.

Four firms representing this category. Congrats to Jwaala for winning one of the best-of-show awards, to Jason Knight from Wesabe who used the birth of his son on Monday as an excuse for not coming to the conference, and to the guys from Expensr for selling their firm to MyStrands.

My take: Some of these PFM tools are like Christmas presents. You love it when you first open it up, you play with it ALL day, and then a week later you don’t ever touch it again.

I believe that there are two critical success factors for apps in this category: 1) Integration with existing online banking and bill pay, and 2) community-driven advice and guidance.

Seeing how your supermarket spending compares to people in Seattle is interesting — once. A patent to categorize my spending at McDonald’s as restaurant spending? Nice, but hardly critical to the long-term success of PFM.

When my colleagues and I spoke to Mint’s CEO a couple of weeks ago, he stated his belief that Wesabe was for the hardcore PFM enthusiasts, and that Mint was for everybody else. Why? Because Mint made it so easy to link accounts.

He’s got it backwards. Who gives their IDs and passwords to firms like Mint and Yodlee? Who spends hours a day or week analyzing their spending trends and comparing those trends with people in theirs and other cities? The hardcore PFM enthusiasts, that’s who.

Mint has indeed made it easier for the folks who are (or were) using Quicken and MS Money to do what they were doing. No doubt about it. But the vast majority of people in the US just don’t care to, nor want to, spend that much time managing their money and expenses. Yes, money is very very important to all of us, but that doesn’t mean we spend that much time tracking and analyzing it.

It’s not numbers people are looking for. It’s words. Words in the form of advice and guidance on how to save a few bucks, on where the good deals, and on who provides good service and prices, and who doesn’t.

Its CEO claims that Mint is “now the leader in free PFM apps.” Maybe for now. But the race has hardly begun. If you combined Mint’s interface/functionality with Wesabe’s community and went to market with Jwaala’s private-label approach, I’d sing your praises at the top of my lungs.

Investment analysis/planning. By my count, there were eight firms that fell into this category, including Boulevard R, Zecco, Cake Financial, Motley Fool CAPS, Invesra, Money Pools, Trade King, and Vestopia.

My take: It was back to the future for me. All the gee whiz bang stock and portfolio analysis capabilities, drill down, charts, graphs, whee! Been there, done that. I get 95% of this already with my current providers. The 5% I don’t get? The so-called social networks.

That was the big twist — you don’t just get to analyze your portfolio, everybody else gets to see what a loser of an investor you are. Of course, you get to see what losers they are to. Couldn’t help but wonder how many people are still day trading (or even investing in individual stocks) that need this level of analysis and community.

One example given was particularly memorable. The speaker showed how you can buy shares of Visa on his site, and then ask the community if it was a good idea. Note to speaker: Most of us find out if buying Visa shares is a good idea BEFORE we place the trade.

I’ll tell you who I’ll be watching in this space: Boulevard R. While they offer an assessment approach not too unlike the Wells Fargo and ING approach I criticized here, what distinguishes Boulevard R’s approach from the big firms was the apparent level of detail in the plan that’s produced (I say apparent because they flipped through the screens too quickly, which was understandable given the time constraints).

There are three key questions that remain to be answered that will determine Boulevard R’s success: 1) Is the plan that’s produced of sufficient quality and detail? 2) Will consumers pony up the money for the plan? 3) Will an existing bank/brokerage come in and offer a better or comparable product?


Overall, do I sound critical? Maybe. I’m definitely a skeptic when it comes to a lot of this stuff. I don’t even remember the names of 90% of the firms I spoke to back in the 1998-2000 timeframe that had similar ideas but aren’t around anymore to remind me of their name.

The ironic thing is that my skepticism about the long term viability of some (many?) of the firms doesn’t diminish my perception of the value of the conference. The ability to get so much information in one shot — and still have ample time for networking — was amazing.

Thanks again to Jim and Eric for having me there, and congrats to them for producing a great event. I hope they’ll let me come to the one in NY later in the year (this blog post may hurt my chances if potential presenters read it).

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13 thoughts on “Notes From FinovateStartup 2008

  1. Great conference, great variety of attendees – analysts, venture capitalists, bankers and bloggers, not to mention twitter pals. I too enjoyed the format, cut to the chase but time to pursue the ones that interested you. And, I enjoyed this summary! Thanks.

  2. Ron, I enjoyed your no nonsense, to the point review. You’re one of the only people I know who has the self assurance to invent a word to enhance a review when one doesn’t come to mind – “disintermediate”??

    I love your comparison of PFM startups to Christmas presents that lose their pizzazz quickly. I have to admit that I signed up on Wesabe and Mint very soon after their launching. I spent a total of about 10 hours getting my accounts set up and then lost interest. I went back to Wesabe recently and decided to try it with one account alone. The information uploading went smoother but I felt overwhelmed when I saw that I had to tag all those individual transactions.

    Regarding the student loan startups – was their any discucssion of the recent student loan credit crisis and how this might affect these startups?

    (I just googled disintermediate and it has its own Wiki article. I stand corrected – It’s not a Shevlinism as I had thought.)

  3. Ron, Thanks for attending and especially for this very well-though out critique. It was great to finally “meet” in person.

    This post is an amazing lesson for anyone in finance services on how to present their product benefits in a coherent manner. This will be required reading for future Finovate presenters. You are definitely invited to NYC this fall, but we may have to put you on the analyst list under a pseudonym so as not to scare any presenters off!

  4. Ron,

    We’re flattered that you think Boulevard R is a startup to watch.

    Regarding your 3 questions…

    > 1) Is the plan that’s produced of sufficient quality and detail?

    We think it is. Each user received a unique, personalized high-level plan, which we call a Roadmap. Instead of trying to fit consumers into a ready-made plan, the plan is prepared by an independent Certified Financial Planner™ based on answers from a questionnaire, which takes users about 30-45 minutes to fill out.

    Our focus is on being actionable. We identify consumers’ next steps, provide tips on reaching their financial goals, model scenarios, do a net-worth analysis, provide high-level investment advice for short and long term investing (we don’t recommend specific funds) and suggest actionable strategies for improving their situation.

    What we’re trying to approximate is the experience a consumer would have with a wealth manager, without the high fees or asset minimums. We’re working with several top CFPs to create this process. To help users on an ongoing basis, we’re building a companion dashboard to serve up their next steps, which we’re breaking down into achievable tasks.

    We’re also working with CFPs to create interactive advice videos with integrated decisions trees, like the one I briefly demo’d on what to do with an old 401(k).

    > 2) Will consumers pony up the money for the plan?

    Let’s see… a nice dinner out or a comprehensive financial plan? I was talking with one of the presenters in the second session and he told me how he’d just paid Ameriprise $700 for a report that essentially told him to re-balance his portfolio. Our Roadmaps are way more valuable than that and only cost $49.

    > 3) Will an existing bank/brokerage come in and offer a better or comparable product?

    Even if they do, I believe that they have a credibility problem with their customers when trying to give this kind of advice. Consumers, in general, are increasingly turned off by the sales pitches that they’re getting from their financial providers and many will find their recommendations suspect.

    Interestingly, when I spoke with banks and brokerages in the session after we demo’d, they agreed (at least in principle) that a company like Boulevard R could have a legitimate role to play as an independent 3rd party. This could help to bolster customer confidence in the provider.

    Unfortunately, financial providers’ short-term focus on profits means that we get things like the sub-prime crisis. When the climate permits, most providers are going to push things like adjustable rate mortgages, even though these are clearly not a good deal for consumers.

    Somebody needs to hold the long-view and communicate the repercussions of taking that home loan that resets to 9% after 2 years. It’s doubtful that this “someone” is going to be the bank or brokerage, and even if it is, I think it’s going to be a long time until consumers are willing to trust their advice.

  5. Thank you for these great reviews, Ron! It’s wonderful to finally get a good understanding of BoulevardR… I didn’t get a chance to do that during BarCampBankSF. But I knew it had to be good because not only are Matt and team very sharp, they are also clearly good people.

    I wish I could have been at Finovate StartUp so that I could speak in a more informed way about what was presented, but from the cheap seats, here’s my take:

    1.) Who needs mobile banking? Srsly? I agree that there are many ways to screw up mobile (SMS) banking. One is to require special software be downloaded. That’s a non-starter. But if you can successfully check your balance by texting “balance” to your financial institution, then there is a demand for that, as well as being able to transfer dollars between accounts. We are a mobile nation, and crackberries and iPhones are freeing Gen Y from cubicle nation. IVRs are a truly horrid and annoying interface. Being able to access directly what I want without byzantine, time-wasting numerical commands? Priceless.

    2.) Social lending is not the one big lump that you’re putting them in here. Zopa is social lending, Prosper is not. These are very different animals, and need to be in completely separate pens. I’d love to hear more about why/how Zopa came out to be the Finovate winner. Is it because we finally understand exactly what it is because they explained it well? Did you personally think it was best-of-show Ron? It seems like perhaps BoulevardR was your personal top? How about Credit Karma?

    3.) I also don’t get GreenNote. It reminds me though, of, which I saw at BarCampMoneyNYC. The concept of FreshmanFund is to make it easy for parents, aunts, uncles, grandparents, etc to make deposits into a child’s college fund, whether it’s recurring or special occasion payments, and to see what you are on track for saving.

    4.) As we’ve been previously tweeting, Mint is just icky gross. I hope it goes away soon.

    5.) Aren’t the Expensr dudes a trip? And I really like Loren from Zecco. He rocks. Zecco seems to be going great, would love to hear more about their prez.

    That’s all for now. Thanks again for being our eyes and ears and giving us these reviews. Great job with that.

  6. @Matt: Thanks for your comment. The underlying sentiment in my questions was not doubt, but “time will tell.”

    It’s amazing what consumers will — and won’t — pay for. To date, a lot of people are whole lot more likely to plop down $49 for a video game than for a financial plan.

    And while I couldn’t agree more that consumers are turned off by blatant sales pitches, please don’t count the big firms out. Last time I checked, a lot more of them were left standing than the dot coms that told me in 1999-2000 that they were going to put the big firms out of business.

    @Morriss: 1) Your logic befuddles me. Because there is supply, therefore there is demand? HUH? And whether or not Gen Y will be “freed from the shackles of cubicle nation” remains to be seen. But even our good friend @itsjustbrent, who often works from Starbucks, still uses a good ole’ PC (or Mac) and check his balance with that device.

    2) I may do another post w/ my “best of show” list.

    4) Mint isn’t icky gross. It’s actually quite slick, w/ a great interface. I’m just not convinced that: a) the demand for this is as great as the entrepreneurs in the space think it is, and b) the business model is the right one.

  7. Ron, thanks for giving an honest review of some of these companies. I’ve read a few others and most of them seem to be “OMG THIS IS THE NEXT BIG THING!”

    Its nice to read a review based on what a consumer might actually use and why as opposed to a giddy review of “new tech”. From what I’ve heard and seen of most of these startups, there are tons of great ideas floating around, but I don’t know that any of them have quite gotten it “right”.

  8. @ Ron

    Yes, let’s see- time will certainly tell.

    The struggle with financial advice is that it isn’t instant gratification and can often times bring unwanted news. That said, what Boulevard R does really well is lay out an actionable, clear path to financial security, so that even if your Roadmap isn’t all roses, we can help get you there.

    We’re fortunate to have Dan Ariely as an advisor. His background as a leading behavioral economist (i.e. understanding how consumers actually make financial decisions and what they’re willing to buy) has been very helpful so far.

    Don’t worry, we’re not trying to take down the FIs. They have the customers. We do think that there are services that we can offer as an independent 3rd party, which could be complimentary.

    Also, we’re not venture backed like Mint, Prosper, Zopa, etc. so we don’t have the pressure to grab marketshare (now, that’s very ’99-’00). We’re more focused on growing organically and making sure that we can provide excellent advice and service.

  9. Excellent coverage Ron. Your analytical ability to cut to the core and see the market value is much appreciated. Your post here breaks down all of the Twitter and blog noise… almost like Finovate Start-up for Dummies. I have a much clearer understanding of the value propositions or lack of value propositions now. Thanks.

  10. Ron,

    I can pay my utility bills on my iPhone already. And I just did. What does that make me? (besides an NPS believer – still).

  11. I am digesting what you have said here and think you may change your mind on some things i.e. mobile banking.

    IVRs need input, part of mobile banking needs input (SMS) so I tend to think the iPhone hardware may allow you to PC your banking habits to a greater degree than a cell phone. I would agree that it isn’t a big deal. But mobile banking (alerts) are an automatic notification process, which from our view, have been extremely well received. It’s not about paying bills, its about getting information that you want without any keystrokes that makes that element of mobile banking needful to a growing segment of one’s market. Those needs should be defined by the individual and offered by the FI. That product development and refinement is still in a vacuum. For example, there still are a number of people that phone the FI or go on-line to find out when and how much a payroll deposit is. If that can be delivered through an SMS message (alert) then that need has been done in an efficient manner.

    As always, your presentation and view is well written and greatly appreciated.

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