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Loving That Minty Smell Of Fresh Data

A Snarketing post by Ron Shevlin, Director of Research at Cornerstone Advisors

In December 2000, I wrote a report called Personalizing Financial Services, in which I said:

“[Financial] firms will create a virtuous cycle of trust with customers through: 1) Preemptive customer service: Fulfilling service needs before customers ask for them; 2) Peer comparisons: Showing how customers how they compare with their peers; and 3) Contextualized advice: Explaining the differences between consumers, and offering advice that leads to a decision.”


In the intervening ten years, the number of banks that have followed this prescription has been overwhelming. Overwhelmingly underwhelming, that is. There are — or have been, at least — three barriers:

1. Lack of causal effect. I simply had no proof (and continue to have no proof) that there’s any causal link between providing peer comparison data and strengthening customer relationships.

2. Technology. Pulling the data together is not a simple task, and, in the absence of an economic model for why a bank would do it, no one has.

3. Privacy. This has been the immediate and knee jerk reaction I’ve heard from countless number of bankers: That providing peer comparison data would somehow be a violation of the bank’s customers’ privacy. Looks like American Banker is jumping on the privacy violation bandwagon, as well. In a recent article, it wrote:

“Mint.com is testing a counterintuitive theory: that consumers will ignore privacy concerns for a feature they find compelling.  Mint announced that anyone can view the transaction data that its roughly 4 million users originally provided for their personal use.”

The rest of the article does quote a number of industry analysts who don’t buy into the “privacy violation” theory (although one prominent analyst who follows the PFM world was inexplicably not contacted for the article — wuzzup with that?).

I’ve got to agree with the other analysts — this is nowhere near a violation of privacy. This is no more a violation of privacy than the US government releasing GNP statistics. After all, those stats are nothing more than an aggregation of spending data across millions of consumers. Did you give the US government permission to include your spending data in those statistics? Of course not. Do you see it as a violation of privacy? Of course not.

All told, Mint.com isn’t buying any of these barriers.

The PFM site recently announced its Mint Data product which “will show spending data both by average purchase price and by popularity, which is defined by number of transactions per month. The rankings can be viewed by category, such as food and dining, by specific business, and broken down to the city level. Visitors to Mint Data can choose among more than 300 cities in the U.S. to compare spending.”

I had a chance to talk with someone from Mint about this, and there were a few things that caught my attention. Mint:

  • Sees this as consistent with their brand positioning of being an advocate for the consumer.
  • Plans on brining an economist on board to develop economic indices based on the data.
  • Is evaluating ways to make the data “social,” possibly by linking the spending data to Google local data, or perhaps to customer review sites.

There’s something that the Mint rep didn’t mention, that seems like a possible angle for Mint to take, however. The tool provides data about spending at various merchants, retailers, and businesses. With Intuit’s focus on small businesses, there might be a play here for Intuit to develop marketing or data tools for its small business customer base by linking in to the Mint data.

It might be hard for some to see how providing peer data is in keeping with being a consumer “advocate”, but, in the context of the “virtuous cycle of trust,” I’m buying it. This is an important announcement from Mint, that points to why PFM tools will evolve into decision support tools for customers, and not be limited to just a budgeting/expense categorization tool.

Ron ShevlinRon Shevlin is Director of Research at Cornerstone Advisors. Get a copy of his best-selling book, Smarter Bank: Why Money Management is More Important Than Money Movement. And don't forget to follow him on Twitter at @rshevlin.

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Comments

  1. Excellent post. I have absolutely no problem with them aggregating data and providing it for me to use at my discretion. I also have no problem with them using my data to construct offers that add value for me. I will only have a problem if they share my data with outside companies without my consent. Consent and transparency is the key.

  2. Kent: Thanks for your comment. I’m betting that a pretty large % of Mint’s 4 million users feel the way you do. Personally, I fail to see how what Mint is doing qualifies as a “violation of privacy.”

  3. Rich Clow says:

    Ron- This is very thought provoking, and I thought I’d add a little additional spice to the mix.
    1) Banks need to differentiate PFM offerings their sites provide. Core to that is the Contextualized Advice you mention. This cannot be restricted to additional banking/credit/brokerage products– it must seek to match brands/merchants/deals. Bank’s have many more insights based upon combined credit and bill pay behaviors than the aggregators— now it’s time to make it valuable.

    2) One of the most unique plays I see is Bundle.com who shows an individual where their spending is, then also allows comarisons to “all” in a demographic. They also have fantastic, rich content that is served contextually from partners ranging from Morningstar to BillShrink. Lastly– it’s all social by design– a head start.

    3) Trust– customers are providing their bank login information to many different types of non-bank 3rd parties. PFM aggregators like Mint, Yodlee, and Bundle provide great value to users, so the risk of providing access to banking internet sign-on’s is not that great. On the other hand, there are sites like Blippy where you register your account information and other “friends” can see how you spend your money. I’d submit there is going to be a “security wave” that disrupts some business models related to credentials. Mii Card just announced an offering w/Yodlee at SIBOS last week, which will be interesting to follow.

    4) PFM and contextual offers mean completely different things to varying customer segments. True to the Banking 2.0 culture, I think the people who will “win” at this will be the ones who spend lots of time listening and working directly with customers. I believe Mint has a head start based upon their loyal fans, value delivered, and ethos around user experience.

    Let’s re-visit in less than 10 years…perhaps 10 months?

    twitter: @rclow

  4. Rich: Thx for commenting. I agree w/ all your points. One thing I found interesting about the American Banker article is that it seems to criticize Mint for making aggregated customer data public, and uses Bundle as a point in contrast, because Bundle doesn’t aggregate its own users’ data. But in using Citi’s customer data, couldn’t it be argued that Citi customers didn’t know their data would be used at the the Bundle site? (Don’t get me wrong, I’m very much of the opinion that what both Mint and Bundle are doing are perfectly acceptable uses of the data). As for the Blippy thing, I’d agree that there are security risks, but my question is: Are there really that many people that find that that valuable? (Not to mention: What’s the business model there?)

    I think we will be revisiting this way before 10 years from now, because the pressure on FIs to demonstrate value beyond offering a checking account is a helluva lot higher than it was 10 years ago.

  5. Jaime Punishill says:

    This is just completely sensationalistic hoo hah from American Banker. The friggin Fed funds report aggregates ALL Americans data showing dollars in savings, stocks, funds, so on and so on. They haved simply dusted off the same stupid privacy arguments from 1998-2002 which were lame then, and even more lame now.

    Forget bundle, some years ago Citi even developed a business precisely to aggregate the spedning data on cards and sell it to merchants, analysts and other because the spend data is so large it perfectly mimics the borad economy. You can see where dollars are shifting much more rapidly than looking at the rool up look back numbers the Fed Res puts out. They had it all blessed by regulators and everyone else that needed to look at it.

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