Chase Bank, Mint Top the Charts with New iPhone Apps

imageimage No one knows for sure how Apple compiles the list of its top-selling iPhone apps, but it’s related to how many are sold during the past few hours. I’ve seen speculation that the measurement period is 2 hours (see note 1).

But there is no doubt about the benefits of rising to the top. The winner receives prime exposure in the iTunes Store and on the iPhone itself (see screenshots below).

I’ve checked the Finance category rankings dozens of times since the store opened in July, and the top app had always been Bloomberg with Bank of America usually the runnerup.

But Friday, a new top seller emerged in the Free list in the Finance category (note 2), Chase Mobile  while Bloomberg and BofA were each knocked down a spot to numbers 2 and 3. The Chase app was released just one week ago (12 Dec). But by Saturday morning (20 Dec), Chase had already been replaced at the top by online personal finance startup Mint, which released its iPhone app Monday (15 Dec), but it didn’t show up in the iTunes store until 1 AM Friday.  Mint stayed at the top all weekend and is still number one now (10 AM Pacific, 22 Dec).

imageIn the screenshot below and right, you can see the free publicity derived from holding the top spot. Also, note that you should put your name into the application. Bank of America, ranked number 3, neglected to include its name in the title, so it loses some branding value. Although, they would have to use BofA to fit into the space.  

Chase App (link to iphone App)
The Chase app itself is attractive and is similar to Bank of America’s with a login button to the website and an ATM/branch-finder utility. As of this evening, 64 reviews have been posted with an average 3.5-star rating out of five, slightly better than the 3-star rating of Bank of America’s iPhone app with similar features.

Mint App (link to iPhone app)
As expected from a company that is carefully using design to help distinguish it from the pack, Mint’s new app is great looking. Across all aggregated accounts, the mobile app shows account balances, transactions, and progress towards budget goals. A nifty alerts icon on the bottom provides a convenient way for users to keep tabs on important info on the go.

Another difference from most banking apps: Mint lets users choose whether they want password protection enabled after their initial login. If you choose to log out, then the app erases all data in memory, and you must log back in next time. If you choose not to log out, then your data remains visible until the next visit with no login required (note 4). This is a great convenience, but something that may not be allowed at regulated financial institutions.

Some users have reported trouble with the app on older phones. On my first-generation iPhone running version 2.1 software, the Mint app wouldn’t download. But once I upgraded the iPhone software to version 2.2, it downloaded flawlessly and all functions worked perfectly. In Mint’s forum, some users were reporting problems with the Budget feature, but it seems to work fine for me (forum thread) (note 3).

Top Apps in the finance category of iTunes’ App Store
(7 PM Pacific, 19 Dec 2008) 

image

 Top free finance apps list displayed on iPhone:
          at 7 PM Pacific, Fri. Dec. 19                               at  2 PM Pacific, Sat. Dec. 20  image        image

Chase Mobile iPhone app                    Mint iPhone app main screen
main screen
(19 Dec 2009)                          (19 Dec 2009)

image       image

Notes:
1. That 2-hour window could be about right. When I made this screenshot, the new Mint app was at number 10; two hours later (9 PM) it had risen to number 5 (see screenshot above). By 9 AM Saturday morning (20 Dec) it had risen to number 1.

2. The App Store divides the top apps into two categories, free and paid. The top 20 free apps are listed on the right side and the top 20 paid apps are listed on the left. The apps in the middle are listed by newest first.

3. These operating system incompatibilities, a real problem in pre-1995 online banking services, had largely been left behind when banks embraced the Web in the mid-1990s. Unfortunately, mobile banking will add to your tech-support costs. 

4. Mint also reminds users that they can choose to lock their entire iPhone for extra security.

5. For more info on the market, see our Online Banking Report on Mobile Banking

Announcing the Finovate 2009 Conference Series: FinovateStartup and Finovate2009

image

We know 2009 promises to be a challenge, but if history is any judge, more lasting innovations will be put in place next year than any year this century. Necessity truly is the mother of invention, especially for startups. 

Next year, we will again showcase the best and brightest ideas at our Finovate conferences:

imageFinovate Startup:
San Francisco – 28 April 2009

The conference features the launch of new companies in financial tech, as well as young companies launching major new products and features. Last year, we had 40 startups participate (see first screenshot below), and this year we expect even more (see demos from 2008).

imageFinovate 2009
New York City – 29 Sept. 2009
We head to NYC for the third year in a row to showcase the best of 2009 in the online and mobile space. Company size is irrelevant; it’s all about what’s new and what’s hot (see demos from 2008, 2007).

Attend a Finovate conference in 2009
About 700 of the most innovative execs in banking, finance and technology attended a Finovate event in 2008. The events are fast-paced, just a single day, and allow you to network with the presenting execs along with the decision makers in the audience. Both attendees and presenters love the format.

If you want to join the excitement, you can sign up up now at deeply discounted prices. Tickets are transferable, and refundable, so the risk is low. If you want to bring your entire team, email Eric Mattson, eric@netbanker.com, for a team price.  

Present in 2009: FinTech startups
If you have a young company involved in the online or mobile finance area, there is no reason not to be at FinovateStartup. This year, we are opening the floor to any qualifying startup. So, for the price of a single ticket, you are ensured a table at the event to show off your company and a chance to demo on stage (see previous FinovateStartup demos). 

The earlier you apply, the more benefits you receive. Please check out the Presenters page or email to eric@netbanker.com.

Present in 2009: other FinTech companies
At Finovate2009 in NYC, we’ll put the best two dozen ideas on stage regardless of the size or location of the company. Last year, we had popular demos from large companies including Intuit and CheckFree/Fiserv as well as startups, Mint, Credit Karma, NeoSaej and others (see previous demos from Oct. 2008 and Oct. 2007).

If you have a dynamite new product and are interested in launching it at Finovate NYC, please email eric@netbanker.com or check out the presenters page.

Press
Last year, more than 50 financial, technology and personal finance press and analysts attended the Finovate conferences. If you’d like a press pass for either event, please email me at jim@netbanker.com.

Presenters at FinovateStartup 2008

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Presenters at Finovate 2008

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Giving the Gift of Microfinance: 2008 Update

image With capitalism bruised and battered in the past year, it’s more important than ever to teach our friends and family about the ultimate upside of business and commerce, the potential to lift families out of poverty permanently. And the need is high, as always.

Unless you have your own personal foundation, there is no better way to do that than by spreading a bit of your wealth around the globe through microfinance companies such as Kiva.org, eBay’s MicroPlace, and a host of others.

This holiday season the major microfinance companies are making it easy to spread the word, and the money, with gifting options. And with Christmas just a week away, here’s a last-minute option that doesn’t require a trip to the mall. 

Kiva <kiva.org>
Kiva is using the same approach as last year, but with an updated paper gift certificate (see below) that can be printed and given to the recipient or sent directly through email. It’s a simple solution that works fine for its rabid fan base. The homepage (below) features a prominent link to the gift page and a counter across the top tracks number of certificates purchased this week (more than 13,000!).

MicroPlace
MicroPlace has a snazzier gifting landing page (see below), not surprising given its eBay backing. The microfinance nonprofit is promoting gift options heavily across the Web, with a large banner last week on the search results page at BN.com (see below) and a costly top banner and right-side skyscraper ad on TechCrunch yesterday (see below).

Microplace is spurring giving with a small Chilean piggy bank that will be sent to the recipient along with an e-card (givers can choose not to send the bank). But the big difference with Microplace’s gift program is that it’s only a “gift in your honor program.” That means the giver chooses the entrepreneur to invest in, rather than the recipient. That gets the money invested faster, but it’s not as satisfying a learning experience, either.

Final comment: There’s not much here that needs improvement. But I do think it would be better to let the giver decide whether they want the recipient (of the gift card) involved in choosing who gets the micro loan. 

And financial institutions: Here’s a great cause to get behind. Not only does it make a difference, it shows you support the small business community.

Kiva homepage features gift option (17 Dec 2008

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Preview your gift certificate before sending (17 Dec 2008)

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Microplace ads at Barnes & Noble (early December 2008)

 image       image

Banner on top of TechCrunch (16 Dec 2008)

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 Microplace gifting landing page (17 Dec 2008)

image

Open Letter to SEC: Leave Peer-to-Peer Lending Alone

Dear Mr. Cox:

image I don’t have to tell you that the Madoff mess has dominated the Wall Street Journal headlines for the past few days. You probably saw Jane Kim’s recap today tallying the $25 billion in known losses so far in a wide-reaching, long-running fraud perpetrated by a firm overseen by your agency.

It’s not that I blame you for the Madoff fraud. The cops can’t catch every crook. But now that you have your hands full with this matter, I have an idea as to how you can free up some staff resources to sort out the mess Mr. Madoff left.

You’ve probably been too busy to read Netbanker (see note 1), but if you had, you’d know that I haven’t been very happy with the way the U.S. peer-to-peer lending industry has been treated by the SEC this year. Thanks to your agency’s efforts, the three major providers have all been shut down for extended periods and several others have been dissuaded from opening at all.

Currently, just a single company, Lending Club, remains in operation, but they were crippled much of the year by a dark period as they spent hundreds of thousands of dollars meeting SEC registration requirements. Thankfully you approved their registration statement and they are now open for business, albeit weighed down by massive ongoing reporting requirements. 

As recently as last year, we had as many as a dozen companies in various stages of launching companies in this space. The goal is to connect people with excess funds to those in need of money with a fair rate of interest established via open bidding in a transparent market. What more can you ask for? 

And even before the SEC became involved, it’s not like these companies were skating by with no regulation. They spent considerable time and money obtaining lending licenses in individual states and/or working with existing regulated financial institutions to originate loans. In addition, the startups all had to comply with a myriad of federal consumer protection statutes. In fact, you could say they were already operating as highly regulated companies.

The biggest of the group, Prosper, even made all its data available to the world including the good, the bad, and the very, very ugly. They could very well be considered the first open source financial institution in the world. Their unique transparency gave us all a ringside seat to watch the ebb and flow of a new market gaining traction. 

No, Mr. Cox, it has not been a smooth ride for Prosper. More than 20% of the loans made the first year have already gone bad, and ultimately the losses may end up above 30%. But with an average interest rate of 17% on the 70% of the balances ultimately repaid, most lenders will get most, if not all, their principal back from their speculative bets. That’s a better return than blue chip stocks over the same period. And I’m sure the investors in Madoff Securities would be happy with to have 98% of their principal returned.

But even before the SEC got involved in P2P lending, things were improving for lenders. The open market fostered quick learning as lenders learned from both from their own mistakes and those of others in the community.

And the exchange operators were learning even faster. Prosper now makes much more borrower info available and began verifying certain applicant statements. As a result, returns appear to be improving. Although, against the backdrop of a severe recession, it’s hard to make good comparisons.

Had these companies been left alone, journalists would be writing stories about how P2P companies were stepping into the lending void left by the turmoil in the banking sector. And how wise the U.S. regulators were in letting this new area thrive amidst the collapse of HIGHLY REGULATED financial companies around the world.

But instead, the SEC decided it needed to keep closer tabs on the tiny $100 million annual volume originated in these markets (that’s just a single day’s worth of fraud by Mr. Madoff). Your agency came to the surprising conclusion that loans, made between individuals in a regulated peer-to-peer market, are securities and needed SEC oversight. And based on recent events, what exactly does that even mean? Besides requiring a flood of documents uploaded to your servers, are you really going to assign an agent to watch over these $3,500 loans. I don’t know what your 2009 staffing plans are, but I’m guessing everyone will still be pretty busy.  

The decision to classify these loans as securities will ultimately cost Prosper as much as $10 million, a potentially fatal blow. Prosper has been shut down as it goes through the SEC-registration process. The SEC ruling has already cost the company at least $2 million in cash: $700,000 just to create the documentation for your agency to review, $1 million to pay-off state securities regulators, and an undisclosed amount to settle with your agency. And the company must still settle or fight the class-action suit, where lenders, who knew perfectly well the risks they were taking (Hello… they were lending to strangers on the Internet!), will try to win back their loan losses by asserting that Prosper was selling unregistered securities.

Furthermore, you are driving innovation and competitors out of the market. The original pioneer in the industry, Zopa, withdrew from the U.S. market, despite a thriving business in the United Kingdom because of the threat of SEC registration. End result: There is just a single U.S. P2P loan exchange operating today. Had you stayed out of it, we’d have at least five, probably more. 

I have this to say to the SEC:

  • Rethink your oversight model: We’ve seen hundreds of billions lost by SEC-regulated companies this year. You weren’t even able to sniff out a $50-billion Ponzi scheme in your own backyard. Maybe you don’t have enough resources. I buy that. Even mammoth funds with virtually unlimited resources were duped by Madoff. So let me ask the obvious question. If you are short on staff, why are you wasting them on controlling the $100-million P2P market where every bid, loan, and repayment are open to scrutiny by the community. 
  • Embrace openness: Instead of stomping on a new, open and self-regulating market, maybe you could learn from it. As Don Tapscott proposed in his BAI Retail Delivery keynote last month, let’s open source financial holdings. If Madoff had made his trading data public, his customers could have monitored the flow themselves, and figured out about $49.9 billion dollars ago that he was fabricating his results. 

Bottom line: Leave the P2P lenders alone. Their open approach reflects an order of magnitude far better than the broken regulatory model employed on Wall St.

Regards,

Jim Bruene, Editor & Founder
Online Banking Report & Netbanker.com

<whew!…stepping off soapbox>

Note:
1. In the spirit of openness, Prosper, Lending Club, Zopa, Loanio, Pertuity Direct and other P2P startups are customers of ours, buying research reports and admission to our events. But the total gross revenues from the sector amounted to less than 2% of our total revenues. We do not invest in any companies we cover, nor do they pay us for consulting, or influence our editorial coverage in any material way. 

New Online Banking Report Published: Growing Deposits in the Digital Age

image Every banker talks about the importance of core deposits, but in most years it’s hardly front-page news: 2008 changed that.

As demonstrated by the shocking downfall of WaMu, Wachovia, and others, a stable deposit base is crucial to your profitability, your brand, and even your viability as an organization.

As a result, deposit product marketing is on the forefront of many bank and credit union marketing plans for 2009 and beyond. With that in mind, we offer the latest issue from Online Banking Report:

Growing Deposits in the Digital Age:
Seventeen smart strategies for gathering core deposits while building your brand

The report includes 72 pages of ideas, tactics, and strategies to expand retail deposits in 2009 and beyond. It was written by guest author Jeffry Pilcher, a branding and marketing guru who recently launched his own brand consultancy, ICONiQ. Pilcher joins OBR Editor Jim Bruene in looking at seventeen promising deposit-building strategies. Many are tried-and-true techniques, such as sweepstakes and rewards, updated with a digital touch. While others, such as bidding on deposits at auction at MoneyAisle, are pure Internet-enabled inventions.

Online Banking Report subscribers may download the report (here) free of charge. Others may purchase (here).

The seventeen strategies explored in Growing Deposits in the Digital Age:

  • Customizable accounts
  • Debit savings rewards
  • DIY online-only accounts
  • Deposit auctions
  • Gen-Y checking
  • Green banking
  • High-yield/big rate
  • Instant online depositing
  • Mobile savings apps & online widgets
  • Online savings buzz
  • Rewards checking
  • Savings automation & incentives
  • Social savings contests
  • Socially conscious banking
  • Sweepstakes & giveaways
  • Social “friends & family” savings

WaMu’s New P2P Funds Transfer Service, WaMu Send Direct

image When’s the last time you Googled something and found nothing? Evidently WaMu’s innovative P2P funds transfer service got lost in all the “excitement” this year and word never got out.

Luckily, I was seated beside Aliaswire (see note 1) SVP Keith Smith at dinner in Orlando two weeks ago. His company powers WaMu Send Direct, a service for P2P payments service for WaMu credit card holders, launched earlier this year at <wamusenddirect.com>.

WaMu Send Direct uses a variety of methods to transfer funds with as little hassle or with as much privacy as desired (see note 2). Cost to the sender is 2% of the amount sent with a $2 minimum. Recipients pay nothing.

This makes for a good pricing model for such things as parents sending money to a child, but not so good for consumer-to-business payments, UNLESS the consumer can avoid a late payment and/or finance charge (aka, expedited payments).

In addition to the 2% fee, the amount sent is posted to the WaMu credit card as a purchase and is subject to the prevailing APR and presumably an interest-free grace period if applicable (see note 3).  

Transfers all come out of a WaMu credit card, but they can go to the recipient in any of the following ways:

  • Directly to a checking/savings account if the sender has the bank account info of the recipient
  • Directly to a debit card, ATM card, or credit card if the sender has the recipient’s card number
  • To the recipient’s phone or email address, requiring the recipient to call or log in at WaMu to claim the funds by providing bank account info; however, on subsequent transfers the recipient would not be required to contact WaMu so long as they signed up for Automatic Claim

Transfers can be initiated via:

  • Website <wamusenddirect.com>
  • SMS message to specific short code
  • Telephone call to a toll-free number

It’s a cool service. It will be interesting to see if Chase continues the service as they assimilate the WaMu credit card portfolio. 

WaMu Send Direct Homepage (5 Dec 2008)

image

Note the text message box at the bottom offering to text a bookmark to the user. 


Notes
:
1. The name comes from the ability for a user to transfer funds (aka “wire”) to other users via “alias”, e.g., email address or mobile phone number.

2. Despite my longstanding policy of avoiding flow charts in NetBanker, here’s a schematic of how Aliaswire’s mPay works. mPay is the service that WaMu has private-branded as WaMu Send Direct

image 

3. The Terms & Conditions states that the payment is considered a “purchase,” which sounds like it would qualify for an interest-free grace period on accounts not currently revolving; however, the terms did not specifically say that.

ZimpleMoney Launches Peer-to-Peer Loan Platform to Power Social Finance

image Start-up activity in the financial technology sector has slowed dramatically since Sept./October when a dozen online finance startups launched (see previous post), not a surprising development given economic conditions and the time of year. 

Still, a number of companies remain in the pipeline, and yesterday we saw the launch of an entrant into the battered P2P lending space. But ZimpleMoney is not entering into the newly SEC-regulated market occupied by Prosper, Lending Club, Loanio and other hopefuls. Instead, the Costa Mesa, CA-based startup is offering a platform with tools so that third parties can either build lending services on top of it, or use ZimpleMoney’s processing capabilities to manage loans and financial transactions.

ZimpleMoney can also be used like Virgin Money USA or LoanBack to handle a single loan amongst friends and family, either for personal or business use. The introductory price for an individual loan is $39 plus $7.99/mo.  

The site, which opened Monday, still looks more like a beta operation. The registration system wasn’t fully functional yesterday, and I ran into several broken links today. But minor annoyances aside, it’s an interesting development that should help drive social finance forward.

Given Prosper’s recent woes, we are not likely to see new Prosper-like P2P exchanges using the ZimpleMoney platform any time soon. But it could be a good way for nonprofits, foundations, or microfinance organizations to launch Web-based loan operations with a minimal amount of development time and expense. Banks, credit unions, and other financial services companies could also private-label the service for their clients.

In his announcement email Monday, CEO (aka ZEO) Steven Rabago said they’d had interest from several nonprofits, a realty company, an investment management company, a student lender, and a large regional bank. Rabago started his career as a commercial banker at Bank of America. He left in 1983 to start National Corporate Finance (now called Archarios). In 2001, he co-founded a location-based services company Telogis, where he remains as a board member.

ZimpleMoney homepage (9 Dec 2008)

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Note: For more info on the market, see our Online Banking Report on P2P Lending.

Bank of America Sponsoring Popular iPhone Tip Calculator CheckPlease

image Like much of the Internet, many free iPhone apps have embedded advertising as their revenue model. The most popular tip calculator, and third-most-popular app in the finance category, CheckPlease, added advertising across the top of its calculator in its version 3.3 release (Nov. 12).

The current sponsor? Bank of America mobile banking, which has the second-most-popular finance app in the iPhone App Store. The advertising is handled by Mobclix, an advertising network focused on the iPhone and Android markets that debuted at TechCrunch50 in September. In a half-dozen visits, I’ve seen only the BofA ad. But the developer, Hardy Macia, says he’s seen several movies advertised on the app. 

Clicking on the BofA ad (first screenshot) takes users to the BofA landing page (second screenshot on right) hosted within the App Store environment, i.e., the pages are not displayed within the normal Safari environment. The only navigation options are:

  • Learn more (see 3rd screenshot)
  • Download (see 4th screenshot)
  • Visit bofa.mobi
  • Close (the X in the lower-right) which takes you back to the CheckPlease app

CheckPlease is a product of Catamount Software which has developed mobile personal finance software since 1994, when it launched PocketMoney for the Apple Newton. PocketMoney is now available for the Palm and iPhone. The company just added an ad-free version of CheckPlease for $0.99.

The free CheckPlease iPhone app has been downloaded more than 200,000 times according to its developer and owner of Catamount Software, Hardy Macia.

      CheckPlease iPhone App                       BofA landing page

  photo (2)          photo 

          Learn More page                                 Download page (note 1)

  photo (3)         photo (4)

Note:
1. Surprisingly, the buttons on this page are not clickable. To download the BofA app, iPhone users must close this screen and open the App Store button on the home screen(s) of their iPhone.

Schwab Takes Over Tully’s WiFi Landing Page

image I go online at a Tully’s coffee shop every few weeks, but I don’t recall ever being pitched something outside the usual Costa Rican blend when logging in to its free Internet connection.

But today, Charles Schwab owned the Tully’s landing page, with three banners running across the page touting its High Yield Investor Checking among other things (see below). The two on the right have financial questions that, when clicked, take the user to an article on the Schwab.com site (see last screenshot).

The banner lower-left is more interesting. Little squares scroll across the banner in a very Web 2.0 way and, when clicked, additional info is delivered directly within the banner. Users stay on the Tully’s page unless they click the Open an Account Today button.

The three scrolling graphics include:

  • ATM fee graphic leads to an ATM calculator (see below)
  • The High Yield Investor Checking graphic (not shown) leads to a description of that product
  • The map leads to a short animated audio visual piece promoting ATM access and the High Yield account

Comment: This type of grassroots marketing can be done by financial institutions of all sizes. Just find a local coffee shop or cafe and see if they’d like a little cash to subsidize that bandwidth each month.

Schwab banner ads on Tully’s landing page displayed after logging in to free WiFi at a coffee shop (Seattle, 3 PM, Friday, 5 Dec 2008)

image

imageClicking on How much do ATM fees cost you? in the banner above opens the following tool in the window. >>>

Users can move to the slider to calculate the cost of a foreign ATM.

 

 

 

 

 

 

Schwab landing page after clicking on question in right-hand banners
(link, 5 Dec 2008)

image

Out of the Inbox: Virgin Money’s Thanksgiving Fundraiser "Pass the Thanks"

image While the SmartMoney example below is simple and inexpensive, it won’t win any marketing awards or new customers. Virgin Money USA, on the other hand, could do both with its clever Thanksgiving email (sent the Friday before) to registered users (see below).

The message from Virgin has a dual purpose:

  1. Holiday well wishes if you simply read the header or glance at the message
  2. Viral fundraiser and user-generated content device if you follow the link labeled, click the sauce to pass the thanks

Sauce clickers are sent to a landing page (see second screenshot below) that encourages them to send their own Thanksgiving greeting to friends. The greeting includes a short message superimposed on an uploaded picture. The company donates $1 to Give a Drop for every message sent and posted 200 of the well wishes on a Picasa Web-album page (here) which are streamed back to the original microsite (second screenshot).

And of course, it wouldn’t be a Virgin production without an irreverent component. Users can choose whether their cranberry sauce is canned (pictured) or homemade.

The Pass the Thanks campaign was also featured on the company’s homepage during the Thanksgiving time period (see third screenshot below).

Grade: A+ for simultaneously engaging customers, doing good, and creating a viral marketing message

Virgin Money USA Thanksgiving email message (21 Nov 2008)

image

Virgin Money USA Thanksgiving landing page (link, 2 Dec 2008)

image

Virgin Money USA homepage (2 Dec 2008)

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Note:
1. For more on Virgin Money and peer-to-peer lending, see our Online Banking Report on P2P Lending

Out of the Inbox: SmartMoney Uses Simple 3-Question Survey to Engage Customers and Solicit Feedback

image Engaging users doesn’t have to to be a long and drawn-out process with multiple passes through legal and compliance to ensure you won’t end up on the 10-most-wanted list at the OCC.

All you have to do is ask customers a question now and then to show that you are genuinely listening. And with low-cost web-based surveys, the cost to conduct a short survey among your own customers is minimal.

Some sample questions:

  • What should we write about in our next newsletter/blog/website?
    (provide list of ideas plus write-in area)
  • Which offer should we put on our homepage?
    (similar to the SmartMoney example below)
  • Where should we locate our new ATM? (with list of choices)
  • How would you rate your recent experience with our call center?
    (sent shortly after a customer talks to a CSR)
  • How would you like to retrieve your balance on your cellphone (via text message, via mobile browser, via voice)

In a real-world example today, SmartMoney Magazine sent me an email (see below) requesting that I complete its “cover survey” which would take “no more than a minute.” The Survey Monkey-powered survey was indeed just 3 questions and took only seconds to complete. There was no marketing (see note 1), no cross sales, and I was left with a better impression of the magazine. Besides a satisfied customer, SmartMoney gains valuable editorial feedback.

image

Note:
1. After completing the survey I was dropped on to the SmartMoney homepage increasing its pageviews and unique visitor totals for December.

2. Photo credit (via flickr): Ryan McFarland at www.zieak.com.

Prosper Pays $1 million to States to Settle Securities Complaint; Nightmare Not Over Yet

image No one said it would be easy trying to disrupt a multi-trillion dollar industry. Prosper’s latest blow is the cool $1 million it spent to settle what could have been a legal black hole, individual states suing it for securities law violations. Here’s today’s press release from the NASAA announcing the settlement.

With state securities regulators off its back, Prosper now has two of its three problems settled. Last week it announced a settlement with the SEC (here). Terms were not disclosed.

But there is one major hurdle remaining: potential claims from lenders wanting their money back. Attorney Broox Peterson commented on Prosper’s potential legal liability yesterday (here):

Sale of a security that has not been registered under Section 5 of the Securities Act of 1933 gives rise to a private right of action under Section 12(a)1 of that Act.  The remedy that can be enforced with this private right of action is rescission of the sale of the unregistered security.  In practical terms this means that investors in unregistered Prosper notes that were ultimately uncollectible can get their money back.

If a significant portion of the lenders, who hold an estimated $30+ million in bad debt, successfully sue Prosper for a refund on the grounds they were sold an unregistered security, it could be very expensive for the company. At least one class action suit has been filed against Prosper (The Rosen Law Firm suit filed Nov. 26 ).  

Comment: Ultimately, I think the U.S. peer-to-peer lending industry will recover from these legal setbacks. However, the regulatory situation has put a damper on innovation, reduced competition (see note 1), and caused a significant reduction in credit available to consumers via P2P exchanges (see note 2).

Court cases aside, the bigger issue is whether P2P loan losses can be kept to a level that provides a reasonable rate of return for lenders. The jury is still out on that (see note 3).

Notes:
1. Zopa has now admitted that the reason it did not open a fully peer-to-peer loan market in the U.S. was because it expected this regulatory treatment (post here).

We always took the view that the SEC would likely view our platform, as operated in the UK and Italy, as requiring registration with them. That’s the key reason why we didn’t launch our UK model in the US…

2. P2P lender Lending Club, which reopened Oct. 14, is fully SEC compliant and open for business. Prosper and Loanio remain shuttered until the SEC filing process is completed sometime in 2009.

3. For more info on the market see our Online Banking Report on P2P Lending.