Crowdsourcing Finance

CrowdThere's an interesting new buzzword in tech sources, crowdsourcing. You can probably guess the meaning: having users perform tasks that directly assist the business such as creating the core content (eBay, Flickr), editing the content (Wikipedia, Craigslist's "flag this entry"), or adding value to it (blog comments, trackbacks).

Marketocracy_homeIt's not a concept that lends itself to financial services, or does it? Marketocracy <marketocracy.com> is a website where 55,000 users run their own "mutual funds," beginning with one million in play money provided by the site (click on inset for screenshot). There is nothing particularly unusual about that as many brokerages and websites allow users to create model portfolios to track.

However, it's what Marketocracy does with these 65,000 user-generated portfolios that makes it innovative. It created a real mutual fund that tracks the portfolios of the 100 most accurate stock pickers in its user base. The Masters 100 Fund (MOFQX) <funds.marketocracy.com> has averaged an 11.65% annual gain since inception (Nov. 5, 2001) vs. 5.76% for the S&P 500.

Financial institution opportunities
While turning customers into investment advisers is a bit of a stretch for most traditional financial institutions, there are more mainstream functions that could be outsourced to end users. For example, a community calendar that users could update in real-time (wiki). Or a personal finance forum where customers post questions or describe their financial situation and solicit advice from other bank customers. To make it more credible, the bank could "vouch" for respondents with some type of "reputation" score. Prizes could be offered to the most interesting questions and/or answers to help spur adoption.

Mastercard_priceless_adHow about having customers design your ads? MasterCard tapped into the popularity of its "priceless" ad campaign with a "create your own priceless ad sweepstakes" earlier this year. The much-parodied ads are so widely followed that MasterCard has a dedicated website where the ads run <priceless.com> (see inset).

Really heading out of the box, how about creating a lending environment that combines the portfolio-management skills of Marketocracy with the person-to-person lending platform of Prosper? Masked loan applications could be posted online and users could choose which loans to fund and at what rates. Actual loan performance would be tracked over time, and the best virtual "loan officers" would receive recognition and prizes (and maybe a job offer). Taking this one step further, why not let the amateur loan officers put actual skin in the game, participating in the loans that were funded through the online loan market.

JB

 

Bank of America Aggressively Courts Small Business

You couldn't miss BofA's bright-red, full-page spread in the business section of yesterday's New York Times (national edition, printed in Seattle, code YT, p. C9). In two-inch reverse type the ad screamed:

Payroll Free.

Below the heading:

Introducing Business 24/7, a suite of remarkable new online banking tools for small business owners.

Then in smaller print under the red box:

Business 24/7 is a remarkable new way to manage your small business finances. Online Business Suite only from Bank of America lets you send invoices and receive payments online so you get paid faster. Easy Online Payroll is the first complete online payroll service that's free.* Visit your nearest Bank of America banking center to open a business checking account and take advantage of these services.

To learn more visit bankofamerica.com/business24-7

Fine print:

*Easy Online Payroll is free when all your employees have direct deposit to a Bank of America  account. Otherwise, there is a monthly fee of $5 per employee up to a maximum of $15 per month.

Bofa_smallbiz_landingThe landing page specified in the print ad, opens to an impressive Flash animation that's a lot like watching an interactive TV ad. You can see what it looks like by clicking on the screenshot right, but you should look at it live to see how voice and animation are used to create an excellent sales pitch.

To leave the commercial, users select the "Get Started" button in the lower right, which leads to another landing page highlighting five key aspects of the service: Business Checking, Easy Online Payroll, Online Business Suite, Small Business Health Insurance, and Business Credit (see screenshot below right).

Bofa_smallbiz_landing2The core of the account from an online banking perspective, is the Online Business Suite. It is comprised of three modules, as shown below. The payables and receivables modules are optional, but the online banking is required. The total package runs $35/mo as follows:

  1. Online banking for $15/mo
  2. Online accounts payables (bill pay) for $10/mo
  3. Online accounts receivable (invoicing) for $10/mo

 

Analysis
Like bill payment, BofA is using FREE online banking services to grab attention, a tried-and-true technique. In this case, the free payroll isn't as free as bill payment, since it requires the employee to have direct deposit with the bank. But with the fee capped at $15 per month, most small businesses won't be complaining about payroll fees.

And the entire account is far from free. In addition to the cost of the checking account, the Business Suite runs $35/mo, payroll for three or more is $15/mo additional, bringing the entire online package to $50/mo. This won't appeal to the microbusiness market, the under-$50,000 crowd of part-time entrepreneurs, but for a full-time business with three or more employees, it's a good value (businesses must be under $20 million in revenue to use this service). When BofA adds remote deposit-capture capabilities, it will be even better.

JB

Consumer Remote Deposit Coming in July

Scanner The first remote deposit solution using a generic document scanner will launch in July, according to its developer Community Bank Systems <bankimage.com>. Without the requirement of buying a $300+ check scanner, remote deposit services will be able to capture a large number of small and micro-businesses.

Analysis
We'll reserve judgment on CBS's ePosit solution until we have more details, but this could be an important way to grab more share of your area's small business customers. And it will make a good copy point for personal checking accounts, though most consumers won't want to learn a new system to deposit a couple checks every month. Conversely, if you lag on adopting this new technology, you may find yourself vulnerable.

As a matter of fact, we could envision a long-term branding campaign around better deposit taking, from reduced hold requirements, deposit-item images available via online banking, and the convenience of 24/7 remote deposit of paper checks. Read some of the rants at HomeStreet Bank's <mybankdoesntgetit.com> site and you can see that deposit INconvenience creates some strong feelings (see this rant and this one).

–JB

India’s New Person-to-Person Payment System

Wallet365_logo_1Although PayPal has made huge inroads around the world with more than half its accounts outside the United States, there is still room for country-specific, person-to-person payment solutions. One new entrant, Wallet365 in India <wallet365.in>, is a service from Timesofmoney, a division of The Times Group, India's largest media and entertainment company.

Wallet365_homeWhile we aren't able to test the service directly, it looks well thought out. We are impressed that it displays its bank affiliation, with India's Yes Bank <yesbank.in> directly on the home page (see lower-right corner on screenshot).

–JB

Creating the Perfect Mobile Wallet for Payments and Banking

Obopay_phone_graphicObopay and PayPal both offer phone-and-text based payments along with a linked debit card for spending the money sitting in your payments account. But it's not as powerful as a true mobile wallet with a cellphone preprogrammed to connect to online banking and various payment options.

Here are the specs of the perfect mobile wallet:

  • One-key access to common banking functions: check account balances, confirm transactions, and so on
  • Money movement between the user's own accounts
  • Send money to others using the bank's bill pay system or inter-institution funds transfer (A2A)
  • Pay for purchases at the point of sale (debit card or credit card) using an embedded RFID chip
  • Authenticate users at ATMs, branches, and remote terminals
  • Person-to-person payments (potentially by linking to the PayPal network)
  • Text message data entry: Update bank account records by sending a text message to the bank (for example, if you paid $22 cash for a business lunch, text to the bank, "22.00 biz lunch" which would be posted to your transaction records)
  • Priority customer service: Voice, text, or IM customer service with minimum wait times with transcripts emailed for future reference
  • Text-message-based alerts
  • Real-time virtual "panic button" to disable phone: If the phone is misplaced, users should be able to temporarily disable payment and banking functions with a simple email or phone call to an automated system

Where will users purchase their mobile wallets?
While first-generation mobile wallets will come from tech startups, wireless phone companies, and Internet giants such as Google, a bank-based model has a number of potential benefits:

1. Trust
2. Integrated online banking features (balance lookup, transaction history)
3. Integrated bill payment (use pre-existing bill-pay merchants)
4. Mobile payment transaction history integrated with online banking history

As cool it sounds, mobile wallets will not replace cash or plastic until RFID-equipped POS terminals are widespread. Until then, you'll still need to carry plastic. That brings to mind a practical interim solution, a plastic clip that attaches an RFID-enabled mini-credit card to the back of a cell phone. Users would have the convenience of waving their cell phone to pay, but could also easily swipe the mag stripe through a conventional terminal.

— JB

How about a “Quicken” phone?

Ipod_phone_concept_1While the high-tech early adopters can hardly wait until Apple releases its own iPod fully integrated with a cellphone (see mockup left), I'm looking forward to one fully integrated with my bank (see NB, June 7).

Besides the usual list of online banking features, I want it to function as a data-entry device, kind of like a mobile Quicken. As I'm out and about, I want to be able to text message expenses into my transaction database, ideally housed at my financial institution.

How it works
Text messaging is used to post payment descriptions directly into my online banking transaction register. For example:

I pay $12.33 cash for coffee with my CPA. Instead of scrawling it on a receipt I'll lose within 48 hours, I text to the bank, "12.33 cash w cpa" which would then post directly into my transaction register. The shorthand would be enough of a description to prompt my memory even if I didn't do a thing until tax time. When back at my PC, I could expand on the description, add tax categories, and if necessary, download into financial software (Quicken, Money, etc.). If lunch went on my debit/credit card, I want to be able to add a descriptor to that transaction when it posts the next day, so I would text, "22.00 cr w cpa."

–JB

Mobile Payments vs. Mobile Wallets

Obopay_phone2One of the better overviews of mobile payments appeared in the Wall Street Journal several months ago (April 26). It looked briefly at TextPayMe, Obopay (see screenshot below) and PayPal Mobile (NB June 5). The article does a good job of contrasting these systems to the more common "mobile wallet" where a cellphone is used in place of a credit/debit card.

Analysis
While we see much promise for the mobile wallets, the mobile payment feature appears far less useful, at least in the United States.

Mobile Wallets: It's inevitable that today's plastic-based payments systems morph into cellphone-based services using radio frequency (RFID) technology as the enabler. For many people, especially younger cellphone-toting, debit-card users, it will be easier to point their phone at the POS terminal and press # than to swipe a card and enter a PIN or sign a receipt. Arthur D. Little projects $37 billion in mobile wallet transactions in 2008, a twelve-fold increase from the $3 billion in 2003.

And for those who don't carry a cellphone, or who prefer a different access device, companies are working on RFID-enabled watches, jewelry, key chains, and something Citibank is said to be preparing for market later this year, an RFID money-clip, which I'd love to use, although I've yet to see a contactless point-of-sale location in Seattle (see, "Creating the Perfect Mobile Wallet," NB June 7). 

Obopay_homepageMobile Payments: On the other hand, text-message-based services, designed to send money to individuals, are a solution seeking a problem. As cool as they look on a well-crafted homepage (see Obopay's homepage right), there just isn't enough payoff for changing deep-seated consumer payment habits.

Even the WSJ couldn't dig out a rational anecdotal example, though the writer tried. The usual "splitting the dinner bill" straw man was trotted out, but upon closer look, too many variables could make it unworkable. Imagine you had a group splitting a $100-tab four ways. The vendors want us to believe that one person will pay the entire bill, then his or her three friends will each text-message their $25 share. Outside of Silicon Valley and a few Manhattan neighborhoods, it just won't fly.

It is not only a hassle (what if the phone call is disconnected, or the wrong button is pushed in a dark eatery), but also each of the three parties will likely incur one or more transaction fees (from the payments gateway, the cell phone provider, and possibly one or more financial institutions along the way). Finally, the person receiving those payments then has to initiate some type of transaction to tap the $75 sitting in their account. 

This makes about as much sense as ordering dog food online. Current methods of sharing costs, either with cash, having the restaurant apply it to two or more debit/credit cards, or by agreeing to "get the next one" works just fine.

–JB

PayPal Mobile Sets High Standard for Ease of Use

Paypal_textobuy_logoMost people interested in electronic payments have probably read reviews of PayPal's mobile payment system launched in March. However, if you haven't had a chance to use it, by all means head over to PayPal Mobile and activate your phone.

The service covers two mobile payment services:

  1. Person-to-person payments: PayPal's email-payments service is extended to phones, mobile or land-line, allowing users to send money to anyone with a phone number using text messaging or by following the prompts on PayPal's toll-free number (800-4PayPal).
  2. Text to buy: To buy things at participating merchants, users send the text message a code to the merchant's text-message number; for example, listed on the PayPal site today is a special offer to purchase a DVD Of X-Men 2 from by texting "X2FF" (full-frame) or "X2WS" (widescreen) to 63336 to FoxStore.com.

Sign-up Process
The sign-up process is absolutely painless (click on screenshots below for a closer look). Assuming you already have a PayPal account, just enter your phone number and then a few seconds later answer the verification call on that number. After that, you can send money to any other phone by sending a text message from your phone or calling PayPal's toll-free access number and following the simple prompts to make a payment.

Paypal_mobile_step1_1      Paypal_mobile_step2      Paypal_mobile_confirm

Paypal_mobile_activatesweepsThe company ran a sweepstakes during the first month to encourage activation with instant prizes valued up to $1,000 (see screenshot left). The sweepstakes has ended, but not before we bagged a fresh $5 credit to our account. All entrants are also in the running for a new BMW.

Security
Although it will take some convincing before PayPal Mobile hits the mainstream, it's really far more secure than using a credit card. When you text money to someone or to pay for goods and Paypal_mobile_howitworks services, PayPal first confirms the purchase by calling your designated phone number for confirmation with a self-selected PIN number. At that time, you are also able to make changes, such as altering the default funding source, which is always bank transfer (see inset for PayPal's how-to-use instructions).

Analysis
In the United States, payment by phone is likely to be a small subset of the "online payments" market. It provides a good solution for situations where a computer is not available (purchasing a new DVD from a magazine ad or paying your friend for the concert ticket she just gave you).

However, in other parts of the world where mobile phone usage is far higher than computer usage, it could become an important payments vehicle.

JB

Tracking Your Competitors’ Search Marketing Efforts

Keycompete_logoAre you tracking the search marketing efforts of your competitors? If not, you should be. If you are, consider using KeyCompete <keycompete.com>, a $199/yr tool that identifies keywords used by your competition and the competition for your keywords.

Enter a URL and the Web-based service returns a list of keywords used by that company in its search engine marketing efforts. You can also do the opposite, enter a keyword or phrase, and see who's using it in their marketing efforts. Results are seen instantly on screen and can be downloaded into an Excel file.

Keycompete_list_keybankIt's a simple way to uncover new keyword opportunities. For example, we looked at Key Bank's current keyword buying (click on inset for details). The majority of their marketing is for boat loans and student loans. But without the KeyCompete tool we'd never know that the bank is advertising its K-12 private school tuition program, AchieverLoan, under obscure search terms such as "Massachusetts preparatory school" and "Addison private school" (see screenshot below).

Keybank_k12_loans_1

Cost
The basic plan, which costs just $199/year, includes a personalized watchlist for URLs or keywords to make competitive monitoring that much easier. For an extra, undisclosed fee, the KeyCompete will provide more detailed reporting on your competition including:

  • approximate clicks per competitor's keyword
  • approximate cost per competitor's keyword
  • estimated overall keyword marketing expense

Overall, some good information to have in your back pocket for next year's budget request.

–JB

“Forever Free” Banking Online

Zios_freebanking_iconIf you were to chart the top-10 events in bank-marketing history, one of them would be the March 1990 launch of AT&T's "no-annual-fee-for-life" Universal Card. Today, an annual fee waiver hardly rates a bullet-point in a three-page direct-mail piece. But 16 years ago, the offer was so successful it caused massive application backlogs that made the 6:00 PM national news. In its heyday, the card attracted one million new accounts per month. However, the marketing stalled once the fee-free strategy was widely copied, and the portfolio was sold to Citibank in late 1997.

I've often wondered if there was a similar opportunity online to recreate the success of AT&T's offer. Probably not, but I do think "free forever" online banking would attract attention and generate new enrollments. To make it profitable, you might make a bundled credit account a requirement (the requirement could be waived in the event of a credit decline).

Halifax_uk_freebizbanking_1
At first glance, UK-based Halifax Bank <halifax.co.uk> has an unbelievable "free forever" business banking program. But you can see the pesky asterisk in the upper right. Reading the fine print, the account is only free if you keep at least 5,000 pounds on deposit and write fewer than 100 checks per month.

The problem is that U.S. consumers have seen so many free-checking offers, it's not such an attention grabber any more. One way to get past consumer skepticism is to provide a longer list of freebies than they've ever seen before. For example,

  • No checking account monthly fees
  • No check-writing fees
  • No ATM fees
  • No teller fees
  • No telephone call fees
  • No online banking fees
  • No funds-transfer fees
  • No NSF/OD fees*
  • No late fees*
  • No returned-check fees*
  • No PIN debit fees
  • No signature debit fees
  • No credit card fees
  • No ACH fees
  • No archive-access fees
  • No statement fees
  • No direct-deposit fees

*If open credit available

Feel free to use this idea and let me know if it works.

Citi Direct Bringing in $1 Billion Per Month in New Money

Bernstein_conf_logo
According to remarks made by Citibank CEO Charles Prince at the Sanford Bernstein investor conference, the bank's new high-yield savings account, currently yielding 4.75% (see NetBanker May 19), is bringing in $1 billion per month in new money. He characterized the deposit total as, "the equivalent of having opened 23 new branches."

His exact quote, available via webcast (comments start at the 47:45 mark of the webcast) was, "In the first ten days after the launch, we had ten times the volume we predicted. Today, literally only a few weeks after the launch, we've raised 3 billion dollars in deposits." He also said that two-thirds of that was "new money to the institution."

These numbers are in line with the industry forecast outlined by Citibank.com director Catherine Palmieri a month ago (see NetBanker May 5) of $250 billion in 2006. If that forecast holds true, $20 billion per month into high-yield savings, Citibank is bagging 7% to 8% of the market. 

JB

E*Trade on MySpace

Etrade_myspace_ad1_1 E*Trade is running a clever teaser advertisement on MySpace today. The 200 x 175 pixel ad in the right-middle area of the user's homepage asks, "Are you willing to accept a $1.50 fee to see this ad?" (click on the inset right for a closer view).

Etrade_myspace_ad_1Choosing "yes" results in another screen saying, "Are you sure?" while selecting "no" yields a "Good." Either way, a pitch for E*Trade's ATM rebate program is the final screen (click on inset left for a closeup). Users clicking through end up on the landing page shown below.

Etrade_myspace_landing Analysis
Although it took me a moment to figure out the premise, that a $1.50 fee to view an ad is as absurd as paying that to use an ATM, it's a clever campaign. The company is sure to get good click-throughs, at least on the teaser ad. Whether the company signs up enough good checking accounts is another matter. But if you are courting young online users, you must take a look at MySpace (see
NetBanker March 16
).   

JB