As a marketer you have to love WaMu. They are bold, quirky, and not afraid to poke fun at conventional wisdom. I haven't liked all their advertising campaigns, but that doesn't matter as long as the bank is reaching its target markets and delivering results.

While the bank has its challenges cleaning up the mortgage mess, its marketing department and ad agency are still producing good work. Case in point: WaMu's new Facebook page (below).

I realize that all banking pages in Facebook will appear lame to just about every 20-something that happens to stumble across them (see previous coverage here). But 20-somethings do still need checking accounts, debit/credit cards, vehicle loans, and so forth. So they will buy banking services. And what brand will they choose? The one that is at least making an effort to meet them on their turf with Facebook pages, text messaging, and humorous advertising, such as the talking banner campaign shown below.  

WaMu's Facebook page, which looks like it was posted April 17, contains videos, a crossword game, a branch finder, a checking account application form, a fan area and a communications app (note 1) that can be added to your Facebook profile. Take a look yourself here.

Excellent work: A

WaMu Facebook Page (23 April 2008) (note 2)

Notes:
1. Even though I added it to my profile, I'm not sure what the WaMu Facebook application does. It appears to be a way to communicate with friends on Facebook and has 49 daily users.

2. The bar across the middle of the page is unrelated to the WaMu page; it's the new Facebook chat feature, that appears along the bottom of all screens, and messes up my screenshot. It does show you where the "fold" exists on a 13.3 high resolution laptop screen.

One perk of working for a large company is being recognized, or winning prizes, for contributing useful suggestions. While employees can be pretty cynical about the whole process, overall, it's good for employee relations to solicit and reward suggestions. Employees appreciate the opportunity to voice their ideas to senior management and do their part in making the company/products better. And if they win a free dinner, it's all that much better. 

The same concept can work even better with customers where you don't have to worry about favoritism and corporate politics. But how do you solicit meaningful suggestions without getting bogged down in an expensive and time-consuming evaluation process? And more important, how do you prevent the really innovative ides from getting killed in the marketing/customer service/IT department, where the not-invented-here bias rules?

Interactive suggestion box from Starbucks
Amidst a sweeping round of innovations announced at its annual shareholders meeting today (see note 1; press release here), Starbucks provided a glimpse of the future of customer feedback with its MyStarbucksIdea, a user-generated discussion forum revolving around product and service suggestions (see screenshot below).

By involving users every step of the way, the system helps remove the inherent bias that plagues most company-run programs. The key is allowing registered users the power to vote on each idea, the best rise DIGG-like to the top, where other customers, along with the Starbucks top-brass, are likely to see them. Other than light moderating of the forum, Starbucks only has to process the very best ideas.

To provide the all-important company feedback to the community, the Starbucks site (note 2) has an area that will showcase the ideas that are actually implemented. The site says there are no monetary rewards, but I would expect that wining ideas will receive some small token of the company's appreciation such as a $50 Starbucks card or t-shirt. You don't want the incentives to be too high, or the system will be gamed and its appeal damaged. 

The most popular idea at Starbucks has to do with providing discounts...no surprise there. But the company has wisely introduced a dozen idea categories to help spur discussion in other areas. For instance, in "Other Product" section (second screenshot below), I found two that I voted for: microwave ovens to re-heat coffee and providing small stickers to keep the coffee from sloshing out the drinking hole while driving.

Implications for financial institutions
I believe that every financial institutions should have some type of suggestion program even if it's just an email address (suggestions@yourbank.com). And I think the open Starbucks approach could work very well. However, if there are no ground rules, most banks and credit unions will be innundated with "ideas" to lower fees, raise savings rates, and so on. As much as you don't want to stifle discussion, you may have to restrict or even forbid suggestions about pricing. Most people will understand that your pricing decisions are not made via the consensus of a public user forum no matter how many votes "interest-free loans" receive. 

To help spur ideas outside the usual complaints, create a list of categories such as online banking, wire transfers, checking accounts, branches, and so on to generate ideas for your different product lines.

MyStarbucksIdea homepage (19 March 2008)

Top ideas in "Other Products" category

Notes:

1. Starbucks also announced a set of rewards for users of its prepaid card including free premium drink upgrades such as soy milk, free beverages with the purchase of coffee beans, and the big one for the WiFi set, 2 hours of free Internet access with a purchase.

2. Interestingly, Starbucks new app is built on the Force.com platform from SalesForce.com.

Update March 6: I added two clarifications pointed out in the comments. First, that normal ACH deposits to your own SmartyPig account are free of charge. Second, that the retailers bonus on withdrawals to their gift cards is UP TO 5% (not a flat 5%). 

How about this recipe? Take a basic FDIC-insured savings account, spice it up with automated electronic transfers and email communications, mix in g

ift/debit cards, wrap the whole thing up in a social network, and top it with a memorable name. What do you have? SmartyPig, the most innovative financial s

ervice we've seen since Prosper launched two years ago.

The site is in the final week of private beta. To register, you still need an invitation code. The company asked me not to publish it, but it's OK if I distribute by request via email. Send a note to info@netbanker with "SmartyPig" in the subject line. Or simply wait until after this weekend when the site goes into public beta.

How it works:

1.  Users create savings accounts at the site. Deposits are held at West Bank, a Des Moines, IA- based financial institution with $1.3 billion in assets. Funding is through ACH (electronic) transfers from outside bank accounts. SmartyPig currently pays a high, 4.3% APY on deposits. 

2. After the account is established, users are encouraged to create savings goals funded through automatic monthly ACH transfers until the goal is met.

3. Now here is where SmartyPig diverges from a typical bank account. The savings goals can be made public or kept private. Public goals can be funded in part, or entirely, by outside contributors. Think of grandma and grandpa contributing birthday money to help junior buy a new bike. Contributions are funded through credit card charges with a maximum charge of $500 and a per transaction processing fee of $4.95. To make sure grandma's $50 doesn't go to a Mario game, the money cannot be withdrawn until the savings goal is met (or canceled by the primary account holder).

4. After goals have been met, the user can elect to take the funds out in the form of a MasterCard debit card or a gift card from a retail partner such as Amazon.com. Participating retailers add up to 5% bonus to the savings goal so that $1000 saved for the plasma TV is worth $1,050 if redeemed via Amazon gift card. That's a great added incentive to use the service.

Gift Cards
SmartyPig also sells gift cards that can be redeemed towards new or existing savings goals. These cards, issued in denominations of $25 to $500, are meant to be given as gifts or employee incentives. They cannot be redeemed outside the SmartyPig system. Physical card are produced and delivered for a processing fee of $4.95 plus delivery fees of $5.95 or more. Or consumers can deliver a virtual card through email to eliminate the delivery charge (but the $4.95 processing fee remains the same). 

Summary of Fees

• Your own deposits: Free (via ACH transfer)
  
• Public contributions: $4.95 flat processing fee for each contribution made by an outside contributor. Contributions can be from $25 to $500 and are funded via credit card.
• Gift cards: Gift cards incur a $4.95 processing fee and an optional $5.95 shipping fee. The shipping fee can be avoided if a virtual gift card is chosen which is fulfilled via email.

Analysis
Although, not everyone is going to want to go through the extra steps to save this way, we are impressed with SmartyPig and are awarding it our first OBR Best of the Web award for 2008 (see note 1). We like how it's part gift registry, part savings account, and potentially a big help in getting users in the habit of saving for larger goals. The look-and-feel is very Web 2.0 and should resonate with teens and twenty-somethings.

There are a few rough edges that need better explanation and/or minor redesign. For instance, there is no way to simply add funds to a savings account without first setting up an automatic funding plan. But the site isn't even officially launched yet, so these issues should be ironed out during the beta period. 

The processing fee for outside contributions of $4.95 per transaction is a bit on the high side (there is no fee for funds transfers from your own bank account). One could argue that it's worth price of a triple mocha for the convenience and benefits of the savings account. But for smaller deposits of $50 to $100, it's a pretty high percentage of the overall deposit.

It would be nice if the company could lower the fee, perhaps by creating an ACH funding option. Another way to reduce costs is to lower the 4.3% APR. I'm not sure the savers attracted to this account really need that high of a rate. A lower interest rate combined with lower fees might make the service more palatable overall.   

The company may have to tweak its business model going forward. But the real lesson here is that savings accounts can be made stickier with automation and incentives. Leave it to the Iowans to show us the way (note 2). 

Screenshots

1. The main account screen: I set up a savings account for my son. Then set a savings goal of $300 for a new bike. SmartyPig requires that the savings goal be funded in equal monthly withdrawals from the linked checking. It would be helpful if you could opt out of the automated savings plan so that the savings goal could be funded manually. 

2. Public goals: If you opted to make your savings goal public, anyone can find it by searching via email address under the "Friends' Goals" tab on the top (you can see this one by searching for jim@netbanker.com). 

Users can publicize their goals with a widget (see inset, and link at bottom of screen above) or by sending email to friends.

After making a contribution, the following screen is displayed.

Note:

1. Online Banking Report (OBR) Best of the Web awards are given for products that "raise the bar" in online financial services, usually for pioneering a new feature. Recent winners are covered here. Five awards were been handed out in 2007: two for Wesabe, and one each for Jwaala, Buxfer and Obopay. In the past 10 years, 67 companies have won the award.

2. Full disclosure: I was born and raised in Iowa and my brother lives within a few miles of the SmartyPig world headquarters.

Update: Quicken Loans has also published a recruiting blog for the past year (thanks Ann-Marie, see comments below and NetBanker post here).

I've been a big proponent of blogging. In my Online Banking Report on the subject published last fall (here), I predicted there would be 300 financial institution blogs by the end of this year. While there is no definitive listing, OpenSource CU's blogroll lists just 15 CU company blogs. Even if you add the CU employee blogs, MySpace pages, and four blogs from Wells Fargo, the grand total is less than 100 today, and unlikely to get much higher than that by year-end.

Why the slow start? Having worked inside several banks, I do not underestimate the difficulty in creating a new communication channel. And from what I've heard, many banks and credit unions just don't believe the benefits, which are largely intangible, will outweigh the costs. And with so few banks blogging, Wells Fargo being the only major in the U.S., it's hard to show examples to demonstrate the power of the blog.

That's why we were happy to see one of our favorite companies, eBay's PayPal unit, launch a blog a few weeks ago (here). As you can see it's not too fancy, and they post to it only a few times each week. But it really hits the mark, in my opinion.

Here's why:

1. Humanizes the organization: The initial posts are by various department heads or senior staff and discuss briefly what they do and a major initiative each is involved in. Each post has a small head shot in the upper left that increases the credibility of the posting (see screenshot below).

2. Educates in a more interesting way: PayPal managers are obviously excited about their projects as their enthusiasm comes across in the writing and makes the reader interested in the subject. For instance, last week CIO Michael Barrett posted seven paragraphs (here) on improving the safety of your online computing experience. It's a good way to get a simple message across, that users should use up-to-date operating systems and browsers. Usually, that advise is buried  five layers deep in a security FAQ.

3. Sells with a more "consultative" approach: Several of the blog entries are designed to "sell" but again, when the head of consumer marketing blogs about the latest program, as Hillary Mickell did about PayPal's back-to-school shopping portal (here), it's much more believable than a banner ad slapped onto the homepage (see screenshot below).

4. Communicate during an outage or severe service problem: The most recent entries (here and here), both posted on the Sept. 2 holiday, informed and reassured customers about the problems with subscription services.

The challenge is generating readership. Would I subscribe to the blog if I was a consumer making an occasional PayPal purchase? Unlikely. But if I'm a merchant, and the PayPal system is an integral part of my livelihood, you can bet I'll pore over every word (note 1).

So, financial institutions, if you want to get into blogging, find the communities where you really make a difference and start speaking to them (see note 2).

Note:

1. The press and analysts will subscribe, spurring articles on your company such as this one.

2. Although perhaps just a shade too critical of the industry for my tastes (see the first comment for some balance), Verity Credit Union's latest post (here) speaks from the heart about the sub-prime lending fiasco and the CU's "Keep the Dream" fund to help at-risk borrowers keep their homes. Great post. Great program. Unfortunately, I couldn't find anything on the website about it.

Note: Read part 1 and part 2.

Many articles and blog posts will tell you that the cost to enter into the world of blogs, wikis, RSS, podcasts, social networking (Facebook or MySpace), social bookmarking (del.icio.us or ma.gnolia), or  Application Programming Interfaces (or APIs) mean that you can start a blog or social media project for your bank or credit union at a total cost of zero. Right?

Well, sort of.

One of the critical, but often unsung factors of success of a social media project is the resourcing. If you're going to invite the public to play, make sure you have someone who can help create the kind of community you want.

As we planned ChangeEverything.ca at Vancity we had many discussions about how to create a vibrant and postive community. We have all seen online bulletin boards, discussion forums and blogs degenerate into the kind of name-calling no one wants associated with their brand. This was one of our worst fears. Since then, we've learned a great deal about community building.

In my first part of this post, I mentioned nine success factors for a social media project. An important one is hiring someone who knows how to nurture and grow an online community. Here's why.

Whether or not hard dollars are spent launching a social media project, someone needs to manage the initiative and ensure that it achieves its goals. This is a very specific skill-set with the following requirements:

• Someone who can inspire visitors to come back, readers to register, and registered users to add good content.
  
• Someone who knows when to get involved in discussions and threads that are degenerating, going off topic, or just going nowhere.
  
• Someone who can elevate good material to the homepage so it will hook like-minded people, as well as delete remarks you don't want on the site.
  
• Someone with good taste.
  
• Someone who understands the business goals of the site and can act appropriately and decisively.

Recently I have seen a few interesting posts speaking to the issue of good online community moderation. One was on Jeremiah Owyang's excellent web-strategist.com: For the Community Managers. I also saw a very good piece on Seth Godin's blog: Jobs of the future, #1: Online Community Organizer. So it seems that more and more people are catching on that this free revolution has some resourcing costs built in if you want to achieve success.

Here are three examples of financial institutions that blog and how they manage their resourcing.

Wells Fargo

Wells Fargo has a total of four blogs, the most for any financial institution. According to their VP of Social Media, the amazing Ed Terpening:

Although we have an Experiential Marketing group dedicated to social media activities for Wells Fargo, all of our bloggers are team members who have other full time jobs. They add blogging - writing, posting, reading, replying - on top of those jobs, and our lead bloggers take a more active role than others. The culture of blogging is unique and we strive to connect with that culture through many different voices at Wells Fargo. Finding the person with the right passion + knowledge is our goal, whether they have a professional communications role or not (most do not).

Verity Credit Union



Verity was the first financial institutions to blog, beginning in late 2004. It recently received an excellent facelift and functional overhaul. It's a highly usable and readable blog. According to their CMO and VP Shari Storm, they staff their blog with volunteer employees from around the credit union. Employees who want to blog go through a quick 10-15 minute training on the dos and don'ts of blogging, and they are allowed to spend no more than an hour a month blogging so their managers won't get upset with the project. This is a nice way to save money on resources. Until their recent overhaul, their blog was even hosted for free at Blogger. Says Storm, "One of the unexpected successes of our blog is how much employees like writing for the forum. We’ve heard from employees that it provides extra job satisfaction and a sense of employee pride."

Vancity



One of the key success factors of ChangeEverything.ca was the investment in a full-time Online Community Moderator, Kate. Kate has been instrumental in nurturing the community, providing them with contests and activities, connecting the site to the press to get earned media exposure, moderating comments and understanding the needs and wants of the site's registered users. Not an easy job, and I always say that Kate is one of the key reasons why the site has grown and excelled in the way it has. She has an amazing balance of clearly knowing the purpose of the site, and also being open to where the community wants to go. She deserves amazing credit and her skillset will only make her more and more valuable. (NOTE: no poaching!)

So, by all means try out social media. There are many low-cost, even free, options. But realize  that for a site to achieve longevity and success as a communications vehicle, branding tool, community platform, or whatever you have planned, you may need to invest in social media management. This means either tapping good people internally to devote time to the project or hiring a community moderator to ensure your project develops to its full potential.

William Azaroff is the Interactive Marketing & Channel Manager at Vancity where he develops interactive marketing initiatives, and pioneered ChangeEverything.ca, the groundbreaking change-themed online community. William also plans strategy for the online channel, with a view to its potential to help Vancity, its members and the community. William brings nine years of experience in Vancouver, Seattle and Los Angeles producing web projects for such clients as Honda, Disney, Intuit Canada and Nike Jordan. He writes about the intersection of online branding, social media and the world of banking on his blog at azaroff.com/blog

A recent article in Bank Systems & Technology looked at the question of whether or not banks were reaping Web 2.0's potential. The subtitle of the article—"some institutions aren't realizing all that Web 2.0 has to offer"—is generous beyond belief.

The article takes the form of a panel discussion, with participants from Wells Fargo, Adobe Systems, Tower Group, and Hurwitz & Associates addressing questions about which banks are implementing Web 2.0 technologies, and why banks aren't embracing them more than they have.

The Tower analyst had some interesting things to say, while the rep from Wells Fargo understandably focused on internal initiatives, although (probably reflecting the part of the organization he works in) he made no mention of WF's blogging efforts.

What had me shaking my head in disbelief was the comments from the Adobe person. Her reply as to why banks aren't embracing Web 2.0 technologies more: "The main obstacle seems to be that institutions are hesitant to improve one section of their website too drastically for fear of making the other sites look even more out of date."

Robin Bloor of Hurwitz better captured reality with his response to the same question:

"It may simply be a matter of where to invest. A Web 2.0 project is very difficult to define in terms of specific business objectives. There are no obvious corporate successes to imitate, and no easy way to calculate payback."

My take: There are three major forces holding banks back from capitalizing on Web 2.0:

1) ROI. Despite all the talk about building customer relationships, most banks invest in sales, not in relationship building. If there's no clear link between the investment and a sale, most banks are reticent to make the investment. An example: Personal financial management. NetBanker now tracks more than 20 online personal financial management sites. Why is it that most banks (with the exception of a select few like Wells Fargo) aren't making an investment in a PFM or Wesabe-like capability? Because they can't see how it ties to making a product sale.

2) History. Besides "no obvious successes to imitate," there are past failures to avoid. Plenty of bankers still remember the online community efforts that banks dabbled in seven, eight, nine years ago. They jumped into those initiatives feet first back then and found that they were jumping into empty pits. This time around, they're more cautious and asking, "What's different this time?" Well, there are plenty of things different this time, but they still need to be educated about, and convinced of, these differences.

3) Banker say what? Ask 100 banks if they could launch a successful social media campaign, and 95 will say, "Huh?" (4 will say no, and 1 very deluded individual will say yes, unless she's from Wells Fargo). Even if some banks were willing to take a longer term view of the ROI on these investments, it's still not clear to many exactly what Web 2.0 is—and isn't. I, for one, wouldn't suggest tossing around words like "wiki" or "facebook" with senior execs at most financial firms.

So is Web 2.0 dead when it comes to banks? No. But the needle isn't going to move until one or both of the following happens:

PFM sites influence consumers' choice of institutions. Wesabe's Jason Knight has said that his firm doesn't compete with banks. And he's right, of course. But if (or when) Wesabe starts becoming an influence on its members' choice of firms in any significant manner, the banks will sit up and take notice. And then start, however belatedly, to get on the Web 2.0 bandwagon.

P2P lending makes a bigger dent in the big banks' business. Firms like Prosper can crow about the dollar volume of the loans being made on their sites, but, for now, many banks assume (rightly or wrongly) that these transactions are not cannibalizing their business. If this view changes, however, banks will start whistling a new tune regarding Web 2.0.

Ron Shevlin is vice president of client solutions at Epsilon. Prior to that, Ron was an analyst at Forrester Research. He opines (translation: rants) about financial services marketing at Marketing ROI: Whims From Ron Shevlin. The opinions expressed here are Ron's, not those of NetBanker, his employer, or any other sane person or party for that matter. 

This past weekend, NetBanker sponsored an event called BarCampBank in Seattle. It's an unusual name for an unusual event. The name derives from an international network of events, which Wikipedia defines as "open, participatory workshop-events, whose content is provided by participants." It usually refers to "early-stage Web applications, and related open-source technologies and social protocols." In this case it was a loose, collaborative unconference about "innovation in banking, credit unions, social lending, or finance." It attracted close to 40 people—credit unions, banking experts, consultants and suppliers across the United States and Canada. It was unfortunate that there was no representation from actual banks.

The topics discussed included the use of social media, credit relief for third world countries, branching strategy, expectations of Gen Y and Millennials, mobile banking, and open-source core processors. Over the weekend, as discussions opened and progressed, the ideas were distilled down to a few themes.

• Banks and credit unions don't really know what it means to be customer-centric.
• The disintermediation that the industry has been seeing on the horizon for years seems to be occurring, and financial institutions had better get on board or lose market share.
• Are social media (blogs, social networks, wikis) an effective way to market and promote banks?
• What would a bank look like if one was built from scratch today?

There was a lot of talk that banks and credit unions only look after their own needs and don't pay enough attention to serving their customers effectively. There is a lack of bravery and responsiveness to their customers' needs. To most consumers, banking is a chore like going to the grocery store or the post office (and in the worst examples, the dentist). People want easy access to their money and sound financial advice; in many cases, that is not what they receive.

There were some very interesting and disruptive ideas. One big one that kept coming up was the banking equivalent of local number portability. You get an account number the first time you create a bank account, and you can move it from bank to bank to bank. An amazingly customer-centric idea. You neither have to change your bill-pay info, nor your direct deposit or pre-authorized payments. This is one of the main factors that keep people where they are, and would force the banks to differentiate based on service and product innovation. The pain of switching would be eliminated and people could change banks when they found a better option for them and not wait until they get so frustrated with their existing bank that they overcome their inertia.

Another theme that emerged, which will come as no surprise to NetBanker readers, is the brilliance of Wesabe.com's model. There is real passion in the way the founder and CEO Jason Knight describes the mission of his organization, which helps consumers make better decisions with their money. With a focus on showing consumers where their money can get them the most value, he doesn't see himself competing with banks at all, but offering a complimentary service. I wonder how many banks see the value Wesabe adds, and will work with it to give customers deeper insights into how they spend their money.

The people in the room were keenly aware of the echo-chamber effect created by being surrounded by those who feel similarly about social media. We were mostly proponents of the relevant use of social media to further the goals of a financial institution. But adoption of blogging, social networking tools and Web 2.0 technology by financial institutions is slow at best, and the number of successful implementations of these tools is few and far between. That honesty was refreshing.

There was an overwhelming feeling in the room that banking is ripe for a revolution. Interesting to come back from BarCampBank and see this insightful article on GonzoBanker about the demise of the banking industry as we know it. Many of these same themes were reflected in our dialogue. Money is too crucial in our lives to avoid big shifts ahead in the financial services sector. BarCampBank demonstrated that this is definitely an interesting time to be in banking.

As Web 2.0 meets personal finance (see note 1), we are seeing for the first time, tiny one- and two-person startups entering the online banking and personal finance space. Back in the bubble days, there were numerous startups such as X.com, dotBank, and PayMe, but they usually required a bankroll of $10+ million just to push something out the door. Today, an innovative personal finance site can be created in a programmer's spare time (eg. BudgetTracker) or for less than $100,000 if the principals take their salary in stock.  

Despite being overly fascinated with issues of shared expenses, such as splitting the dinner bill (see Buxfer main default page at login below), there is much to be learned from the newcomers (note 2). They tend to be refreshingly designed and clever in their use of modern navigation and communication techniques, something that cannot always be said about typical banking sites.

And the newcomers are also trying to ride the "social networking" wave, and expense-splitting provides a so-called "social money" benefit for use in elevator pitches and press releases. And for couples with his and her checking accounts that divide bills and expenses between the two, expense-splitting features could be a marriage saver. 

We'll be looking at a number of these sites during the next few weeks as we prepare a follow-up to our August 2006 Online Banking Report on Personal Finance 2.0 (link here). Wesabe is the best known of the bunch, having received a considerable amount of press as a social money site. But before we get to them, take a look at one of their competitors, recently featured on TechCrunch (here).

Buxfer is similar in many ways, but has not had near the attention. The company which recently relocated to Silicon Valley as part of the Y-Combinator program, came out of beta in September, but has recently added several new features. 

They have several impressive features that no bank or credit union has offered to date:

• Login via third party authentication APIs from Google, OpenID, AOL, Yahoo and Facebook; really helps get users past the "do I really want to give this company my personal info" stage (see note 3)
• Transaction import, via simple browse/upload function (see note 2)
• Transaction input via custom email address: Buxfer provides users with their own email address that can be used to send new transactions into the system (see inset) 
• Auto-tagging: users can select any key word in a transaction description and have it auto-tagged, for example, say Fred works for you, and when you have a transaction called "lunch with Fred" you can have it auto-tagged with "business" 
• File append: You can easily add note or attach files, such as receipts, to individual transactions
• Widget/gadget that shows expense breakdown that can be displayed directly on the desktop (see screenshot above) 

Weaknesses:

• If you enter an email address for someone who you are setting up as a participant in a shared transaction, eg. splitting the dinner tab, Buxfer prompts you to save them as a new contact. In doing so, an automatic email is generated from the user, inviting them to join the service. That's fine, but the user needs to have more control over the invitations. Buxfer's blog provides a work-around, suggesting using something other than an email address, but spamming your friends should never be the default.
• The main page (screenshot above) focuses on who you owes money to whom, instead of the more common issue of what bills are due and when.
• No support for transactions. Other than being able to import transaction files that have been previously downloaded from banks and card issuers, it's all manual data entry. Helper tools such as "copy", "repeat entry" and "auto-tagging" help a bit, but to be an effective tool the service needs to integrate more closely with the actual bill and the payment. That's why these companies need to forge close ties with financial institutions to move beyond the outlier Tracker 2.0-user into the mainstream market.

Notes:

1. For more on online personal finance, see our full report on the subject, Online Banking Report #131/132 (here)

2. I suspect the expense splitting priority is a result of founders who are young, single, frugal, and obsessed with tracking personal finance details. They are the types that worry about whether the bar tab was split equally, and go home and code solutions to it, while the rest of their group is sleeping it off.

3. When logging in through a third-party service, users are not required to provide ANY personal info, i.e. there is NO registration process, an amazing experience. 

4. Screenshot of file import:

Several banks, including PNC in the bubble days and WaMu through eBay in early 2004, have tried auctioning certificates of deposit (see Online Banking #104). Those first attempts were aimed at retail depositors, an unlikely audience for a several reasons. First, the demographics of retail CD buyers is decidedly older and they tend to be fiscally conservative, not the right group for a new-fangled way to buy from the bank. On the other hand, CD auctions are a great way to introduce a bit of Web 2.0-style innovation into what is mostly a commodity.    

So Zions Bank, through its Zions Direct division, has chosen a different path. Instead of creating an eBay-like environment for retail investors, it is using its non-bank investment division to sell CDs like the Treasury Dept sell t-bills. The certificates are sold at a discount to par, resulting in an acceptable yield for the bidders. 

Analysis
While PNC and WaMu's efforts were clearly just market tests that were shuttered after a few months, the Zions auction platform is full-featured. It appears to have staying power provided the bank is comfortable with the prices its paying. 

Clearly, this is not a retail playground. There were 20 bidders making a total of 28 bids with a median bid dollar amount of just $10,000. However, there were three huge bidders, all playing with $2 million in cash, that set the final prices. Most likely it was someone in a large company treasury department looking to increase its yield on excess cash by a basis point or two.   

But even though the big money sets the rates, the small depositors can still win since everyone received the same "market-clearing" rate. For example, four of the 14 winning bidders in the March 27 auction were small CDs of less than $5,000:

Winning bidders by size of deposit:

• 4 had $1,000 to $4,000 
• 5 had $8,000 to $20,000
• 2 had $90,000 to $100,000
• 1 had $200,000
• 1 had $536,000 (partial fill of $2 million bid)
• 1 had $1 million (they also had non-winning $2 million bid)

It makes sense to set rates for large deposits this way. It mimics the way the capital markets already function. And it allows motivated smaller depositors to join the "action," receiving what they are likely to perceive as a fair price since it was set on the open market. Some day, the majority of CD dollars will be sold this way.

Finally, an added bonus for the first-mover, it positions Zions as innovative, fair, and looking out for its customers. The word of mouth and press attention should quickly pay back the investment Zions made in the platform.

More information:

• Press release here
• American Banker article here
• Online Banking Report #104 here

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Zions March 27 CD Auction Results
(see screenshot right or view archived page here) 

Product: $2,000,000 in 5-month CDs

Bidders: 28 bids from 21 bidders

Final Price: 5.506% rate

Start date: 20 Mar 2007

End date: 27 Mar 2007 (6 PM EDT)

Discussion: Two $2 million bidders tied at the market-clearing rate, one ended up with a partial funding of $537,000 and one ended with zero, so had Zions made more money available, it could received total deposits of $3.6 million at 5.506% rate.

Wells Fargo marked the one-year anniversary of its first blog, Guided by History, with a Q&A today with the bank's Social Media VP, Ed Terpening. The post appeared in the the bank's Student LoanDown blog (post here), which just made it past the six-month mark. I've already weighed in on its blogging strategy (see previous coverage here), so I won't repeat myself.

The bank is experimenting with a number of social media outlets to extend its brand and see what works and what doesn't. Not all of these will pan out. The MySpace presence seems like a long shot, but then again, the cost is negligible so it's worth a try. Wells Fargo has wisely not posted a pure "banking" presence, but instead used one a character from its StageCoach Island game (see screenshot below). 

Bottom line: The bank's willingness to try new things has created an impressive lists of "firsts:"   

• First U.S. bank with a blog (though Verity Credit Union beat them to it by more than a year)
• First bank with a student loan blog
• First bank with a business banking blog
• First bank in the world with a Second Life presence
• First bank on MySpace at <www.myspace.com/stagecoachisland>, really more an extension of its StageCoach Island game which also has its own blog here (see below; though several credit unions beat them to it)
• First bank with 2, 3, and 4 blogs
• First bank with an avatar persona on MySpace
• First bank with a VP Social Media (who appears to be proactively reaching out to the blogging community)

I've been an Expedia regular for 10 years, so I only check Orbitz on occasion. But I was there today and was impressed with what they are doing in mobile alerts. You'll have to read the next Online Banking Report for all the details (note 1), but I wanted to pass on one idea that could be used by banks and credit unions today.

I call it an alert ticker. What it does it track the number of OrbitzTLC alerts sent to customers (see it in action here). The odometer-like counter rolls over about once per second and currently reads 87,794,309 (see inset). ING Direct has done the same thing for many years with the total interest earned by its savings customers. 

Below the ticker is another feature that financial institutions supporting voice-mail alerts should consider, a quick trial entry form. Users can type in any phone number, landline or mobile, to receive a sample voice message alert (note 2). Those entering a mobile number can also receive a sample text message by checking the lower box (note 3).

Notes:

1. Online Banking Report #140 will be available in early April.

2. They didn't ask for mobile phone carrier, so Orbitz must send a message to all the major carriers, e.g., yourphone#@cingular.com, yourphone#@verizon.net, and so on figuring the right one will get through eventually.

3. It's been three hours and I've received neither a voice message or text message. 

4. Banks should also take a page from Southwest Airline's Ding service (see coverage here and here).

The nascent market of online social or person-to-person (P2P) lending turned two as its pioneer, UK-based Zopa, celebrated its second birthday today. In addition to slapping a this enormous "2" button on its homepage (see screenshot below), the company marked the occasion with an open house at its headquarters, an online lunch-time webcast, and an online giveaway of ten iPod shuffles (see the text of the email message sent to Zopa lenders and borrowers here).

The Latest Numbers out of Zopa

According to Easier Finance (thanks to PaymentsNews for the link):

• Zopa has 135,000 members
• Zopa lenders have received on average 6.75% before-tax annual return after fees and defaults
• Zopa borrowers have obtained loans at rates as low as 4.2% APR
• The current default rate is only 20 basis points, 0.2%

Zopa continues to create a considerable buzz in the UK. The company's homepage links to 42 articles from a diverse range of publications, most recently The Sunday Times and The Daily Mirror. And my favorite, an awesome piece from the UK's public-service Channel 4, that is unlike anything I've ever seen on U.S. news (click the play button below). 

The YouTube replay of the 4-minute feature was posted to Zopa's blog March 1 along with TV clips from CNBC and Fresno, CA news. The Channel 4 piece covers the topic of "social lending" in general and primarily covers Zopa, but near the end, another UK alternative lender is interviewed, Fair Finance <fairfinance.co.uk> is interviewed. We'll look at Fair Finance in a separate post.

Evidently, Wells Fargo has found blogging religion. Not only is it the only major U.S. financial institution with a blog, but it now has not one, not two, but FOUR public blogs.

Here's the lineup:

Previously reported:

• Guided by History: The bank's first blog, a community service resource that began in March.
• The Student LoanDown: An excellent blog launched in September to support the bank's student loan business. We've reported on it here and here.

Launched in August, but not previously reported:

• Commercial Electronic Office (CEO) Blog: This B2B blog supports the bank's Commercial Electronic Office business portal. It launched August 10, but is not listed on the bank's blog index page <blog.wellsfargo.com> or on the bank's main website. Our initial reaction: The CEO Blog is an all-business affair with 39 posts in four months, a good rate for a business blog (see screenshot below). We'll take a closer look in a future post.

Newcomer:

• Stagecoach Island Community: Another good-looking blog (see screenshot below) launched Nov. 27 supporting the bank's Second Life-inspired virtual world Stagecoach Island (see our coverage here).

Since its September launch,  Your Credit Advisor <yourcreditadvisor.com> has posted several trendy lists to attract traffic to its credit card application portal. The latest entry, "Top 25 Web 2.0 Apps for Money, Finance, and Investment."

The article includes helpful summaries of each site's capabilities. It's a good jumping-off point to do a little outside-the-box thinking about Web-based finance (see also, Online Banking Report #135/136, "How to Web-2.0 your Online Banking").

This list includes:

• Two loan sites: Zopa and Prosper (see previous coverage here)
• Six personal finances sites: Three we've covered: Dimewise, foonance, ioweyou (see our previous coverage here) and three new entrants: NetworthIQ, MedBillManager and Wesabe, a fascinating social money site we'll cover later this week
• Five real estate sites: Homethinking, iiProperty, Rentometer (owned by iiProperty), Trulia, and Zillow (see our Zillow coverage here)
• Two miscellaneous sites: PayScale, cFares
• Ten investment sites: BullPoo, Motley Fool's CAPS, DigStock, FeelingBullish, GStock, MoneyTwins (foreign currency), SaneBull, StockTickr, WikiFinancial