Notes From FinovateStartup 2008

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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.

PFMs.
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?

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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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