A new financial market will open Monday where businesses as small as $1.5 million in annual sales can borrow against their receivables with prices set in an auction market.

New Orleans-based The Receivables Exchange opens for trades on Monday (17 Nov) after an 18-month development cycle.

Businesses register with the exchange, a process that entails uploading financial statements and completing an application. The Receivables Exchange conducts due diligence on the potential participant to ensure that it is legitimate.

Businesses must meet the following criteria:

• Minimum of $1.5 million in annual sales
• At least 2 years of operating history
• Registered to do business in the United States

Upon approval, the business can list specific invoices for financing, with a minimum total value of $10,000. Then accredited investors (SEC definition here) bid to provide short-term financing until the receivables are collected. Sellers are encouraged to upload PDF copies of invoices, proof of delivery, and so on to get the best rates. However, many documentation requirements are optional.

Sellers select the terms they are willing to accept and the bidder that beats those terms by the widest margin wins the credit. If no bidder meets the minimum terms, the auction ends without a trade.

Co-founders: Justin A. Brownhill and Nicolas R. Perkin

VC backers: Prism VentureWorks LLC and Fidelity Ventures

Analysis
In an era of tight credit, it's a welcome addition to the financing tools available for small and mid-sized businesses. Larger businesses typically have more options through commercial paper and other capital markets.

The startup expects banks to be valuable sources of referrals. Although, at this point, there are no referral fees or revenue-sharing options.

So far, The Receivables Exchange has signed up sellers with a total of $2 billion in annual sales. And there's been a lot of interest. Founder Nicolas Perkin says his company has been approached by 20 $1+ billion companies.

But what about the other side of the trade, the lender/investor? The company says it has access to $8 billion deployable capital. Of course, that doesn't mean that the capital will be easily enticed into actual deals.

Starting Monday, we'll see what the buy side thinks. Are they willing to risk their capital in the unproven market? If The Receivables Exchange can drive out fraud and deliver on its promises, we think the answer will be yes.

The Receivables Exchange homepage (11 Nov 2008)

I've communicated with Privier founder Charles Polanco a number of times over the years. He's a Wachovia alum who's been working on a financial startup for several years. The company launched a suite of payment services on Oct. 16 that aims to get the plastic card out of the ATM business (press release).

Privier's value prop is straightforward and compelling: Enable money transfers from any device at any time with the cash delivered through the worldwide ATM network.

The system initiates transfers in three ways:

• ATMsend: ATM to ATM
• iTransfer: Web to ATM 
• mPayment: Mobile phone to ATM

In Privier's model the ATM card is replaced by a one-time authorization code that recipients key into the ATM to withdraw transferred funds.

Analysis
From a usability perspective, it's a great idea. After all, what's not to like? Consumers need to send cash. ATMs have cash. Why not let folks authorize a remote ATM withdrawal from the comfort of their own home or office. A proposed fee in the $7 range beats most alternatives for long-distance money transfers.

However, from a practical standpoint there are two massive roadblocks to overcome:

• Retrofitting ATMs to accept a keyed-in code instead of a mag stripe for authentication
• Convincing banks to add ATM-transfer capabilities to Web, mobile and telephone services

It will likely take an organization the size of Visa, MasterCard, or Bank of America to pull this off. To ensure that those behemoths work with it, Privier has a portfolio of patents pending on the business process. 

What it means for Netbankers
It may take decades, but eventually, the Web married to mobile will eliminate the plastic debit/credit card; however, unless you are a major bank or payments company, this isn't likely anything you need worry about for a number of years.

A better short-term solution for smaller financial institutions is to enable P2P funds transfers using PayPal so you can send money to anyone with a PayPal account (see note 1).

Privier's Web-based interface for sending cash to an ATM (5 Nov 2008)

Note:
1. See our latest, the Online Banking Report 2009 Planning Guide, for more info on project priorities for this year and beyond. 

Providing free credit scores in exchange for viewing a credit card offers seems like a reasonable value exchange (see note 1). That's why we gave Credit Karma our OBR Best of the Web award in August and why it is on stage next week at Finovate (see previous coverage here, video at Finovate Startup here). 

It's also no surprise that there would be others trying the same model. Credit crisis or not, credit-worthy borrowers are still a valuable commodity. Case in point, Bankaholic's recent acquisition by BankRate for a reported $15 million, or $50 per unique visitor (Mashable post here).

The latest entry in free-credit-score lead generation is KnowBeforeYouApply (KBYA)from Centrro, a financial-search company founded in 2006 by Ike Eze and Tuyen Vo. Eze was a founder of QSpace, a OBR Best of the Web winner in 1997 when it became the first company to make credit reports available online (archived OBR article here). QSpace was acquired by Experian several years later.

KnowBeforeYouApply launched on Sep. 3, but was put on the map with Mr. Eze's post today in The Huffington Post entitled, "Stay Away from Me, Credit Card Crisis" (see note 2). The article discusses the value of tracking your credit score and using that knowledge to find the best credit offers. Eze mentions his company along with Credit Karma, Quizzle from Quicken Loans, two other Finovate presenters, Mint and BillShrink.

Using KnowBeforeYouApply.com
It would be difficult to make the site any easier to use. Customers type in their name, address, email address, and last four digits of their social security number. Apparently, that's all that's needed to access your credit file and return a letter grade of A through F.

The whole process takes about 30 seconds and there is no need to enter an entire social security number and KBYA steers clear of those pesky out-of-wallet authentication questions. Users can get an update of their credit grade every 90 days. In comparison, Credit Karma, which provides an exact 3-digit credit score, will update it daily if the user so desires.

KBYA also has a simple and intuitive sales platform. Just two offers were highlighted in the main screen, one from Chase and one from American Express (see first screenshot below). However, clicking through to "see all offers" led to 25 pages of credit cards, displayed five to a page (121 total for A-grade credit). A handy index along the sidebar allows users to find various categories that most appeal to them such as "travel rewards" or "0% intro rate" cards (see second screenshot).

KBYA appears to use the API from CardOffers.com to build a portion of its database of card offers. CardOffers.com offers its affiliates up to $20 per application or up to $160 per approved application. KBYA also appears to be an affiliate of Credit.com and Discover Card (see note 3).

The site is focused solely on credit cards for now. But a Home Loan tab is built into the user interface, with a "coming soon" label.

Analysis
All in all it's a good service. The site needs to beef up its FAQs, About Us, and other educational material so users can better understand who is behind the service and what exactly the credit grade means. But a month old beta service so I presume that's coming.

While I prefer the precision and peace of mind of seeing my actual credit score, a letter grade every 90 days is sufficient for many (most?) users and helps keep costs down. And the speed of the application process and lack of social security number are real benefits.

Financial institution opportunities
Bank, credit unions, and card issuers should consider offering similar functionality both inside online banking, where you would already know their private info, and on the outside where prospective loan customers could use it. With info about the customer's credit grade, lenders could deliver tailored offers that could lead to increased application volume and approval rates. See our recent Online Banking Report for more info on lead generation sites (note 1). 

Know Before You Apply main page after login (7 Oct 2008)

KnowBeforeYouApply all-offers page (7 Oct 2008)

Notes:
1. For a thorough discussion of the topic, see our August 2008 Online Banking Report on New Models for Lead Generation.

2. Strangely, the article doesn't specifically disclose Mr. Eze's affiliation with Know Before You Apply; although clicking on his name does show that's he's CEO of Centrro. However, it's left to the reader to discover on their own that Centrro is the parent of Know Before You Apply. Hopefully, that oversight will be corrected.

3. The affiliate relationships are inferred from the redirects that take place when clicking on the Apply Now arrow.

4. This is one of the ten online finance companies that launched in September (post here).

Add one more company to the list of recent launches: Loanio went live today after a lengthy "coming soon" process (previous coverage here). The thousands of people on its email list received a message this morning announcing the launch (see below). 

Founder Michael Solomon demo'd the product back in April at our Finovate Startup event (video here). Today's live version looks similar to the April build. The key differentiating features of Loanio's product are:

• Ability for anyone to borrow, if they have a creditworthy co-borrower
• Optional enhanced pre-verification process (costs $35 for single borrower, $45 for co-borrower apps), allows borrows to boost their credibility by submitting the following documentation in advance of posting their listing:
  - Photo ID
  - Income documentation
  - Bank account statement
  - Employment documentation
  - Postal address documentation
• Longer loan terms...up to 5 years compared to P2P lending standard 36 months
• Borrowers have the option of accepting partial funding of their loan request as long as it's at least 35% funded

Several other tidbits from the FAQs:

• Experian provides the credit info on borrowers
• Lenders pay a 1% service fee on all outstanding loans
• Buyers pay an origination fee as follows equal to the greater of $95 or:
  -- Loans with one borrower: 2% for A and B credit grades, 3% for all others
  -- Loans with co-borrower: 3% for A, B and 4% for all others
• Borrowers may seek loans of $1,000 to $25,000
• Lenders must put in at least $100 to participate with a minimum bid amount of $50

The first borrower listing appeared on the site within the last hour or so, a C-grade credit seeking $2800 for debt consolidation (see screenshot below, note 1).

Screenshot: Loanio home page with first loan listing (1 Oct 2008)

State coverage limited
At launch, Loanio has only gathered licenses to lend in 22 states (see note 2). However, 10 of those have interest rates caps of 12% or less, so lending will be limited to only the highly credit worthy, and one (Minnesota) caps the loan amount at $2550.  Here are the 12 states which Loanio primarily competes in today:

State	Max Interest Rate
Alabama	30%
Georgia	30%
Mississippi	30%
New Mexico	30%
North Carolina	30%
Indiana	21%
West Virginia	18%
Wisconsin	18%
Alaska	16%
Nebraska	16%
New Jersey	16%
New York	16%

These are the 10 states that allow borrowing from Loanio but cap the rate so that only those with excellent credit are likely to receive funding:

State	Max Interest Rate
Tennessee	12.25%
Hawaii	12%
Louisiana	12%
South Carolina	12%
Virginia	12%
Connecticut	12%
Arkansas	11.25%
Delaware	11.25%
Kentucky	10.25%
Pennsylvania	6%
Washington D.C.	6%

As you can see, there is no lending in major population centers of California, Texas, Florida, Illinois, Ohio, Massachusetts and for the most part in Pennsylvania with a 6% rate cap. But there are ways to change that and Loanio can at least get started in 10 states while if fine tunes it's business and develops methods for lending in all 50 states. Prosper and Lending Club both originate loans nationally through Webbank before passing them to the individual lenders. Not only does this allow nearly full geographic coverage, it usually bypasses state-mandated maximum loan rates.

Loanio joins Prosper, Lending Club, GlobeFunder, Fynanz, GreenNote and Virgin Money in the U.S. P2P lending space. Although, currently only Prosper, Fynanz, and now Loanio, operate true P2P exchanges. The others are either closed to individual lenders temporarily (Lending Club, GlobeFunder) or require borrowers to find their own funds from friends and family (GreenNote, Virgin Money). For a complete look at the market see our Online Banking Report on Person-to-Person Lending.

Email: Loanio now open (received 10:39 AM Pacific time 1 Oct 2008)

Note:
1. Unfortunately, this loan is not likely to be funded due to the max interest rate of 6%, likely because she is a Pennsylvania or Washington DC resident where the rates are capped at 6% (see table).
2. Just about anyone 18 or older can be a lender regardless of where they live. I believe Only South Dakota and Pennsylvania residents are currently ineligible to lend through Loanio.

What a month for financial tech startups! Partly due to DEMO, TechCrunch50 and our Finovate, there's been at least 10 online financial service launches or unveilings this month in North America alone (note 1).

That could be the sign of a bubble about to burst, or it could just be a bunch of smart people meeting very real market needs. Only time will tell. 

Lucky number 10 is Pennyminder, an online personal finance startup based in Vancouver, BC. I met the founder, Vince Hodges at BarCampBankBC last Saturday (coverage here). Although Pennyminder joins a crowded field, the seventh personal finance manager (list below) to launch this month, it's the first ever based out of Canada. That alone should help it gain some traction.

Vince gave me a beta invite, so I've had a chance to look at it. It's a nice, clean design that allows user entries, statement import and supports an expense sharing/social angle. I don't know if that's enough to compete with the dozens of U.S. and international personal finance sites, many with VCs funding a wider range of features, but it's a good start.

Pennyminder will have to figure out a way to break through the clutter, such as partnering with credit unions and/or banks.

Here are other six other newcomers this month:

• Thrive unveiled here yesterday and launching at Finovate NYC Oct 14
• Rate Surfer unveiled at the TechCrunch50 DemoPit on Sep. 9 and launching at Finovate NYC Oct 14 (our coverage here)
• iThryv from Shryk unveiled on stage at TechCrunch50 on Sep. 8 and covered here that day
• Expensify unveiled at the TechCrunch50 DemoPit on Sep. 8 (our coverage here)
• Rudder unveiled here Aug. 23 and launched at DEMOfall on Sep 8
• GreenSherpa unveiled here July 18 and launched at DEMOfall Sep 8

Note:
1. Includes the seven mentioned here plus three more I've yet to blog about.

With three weeks remaining before Finovate NYC, the final company in the demo lineup is stepping out of stealth mode and announcing its participation in our second annual new-products conference. See the full list here.

Thrive will be launching its entry in the online personal finance marketplace, JustThrive.com, at Finovate on Oct. 14. The company hopes to differentiate itself with more advanced financial planning tools while still remaining free. Founder and CEO is Avi Karnani; Marc Matsumoto is CMO.  

Currently, the service is in closed beta testing but Thrive recently updated its homepage with a timely message playing off last week's financial debacle(screenshot below). 

We had a chance to meet with its NYC-based founders earlier this year and were impressed how they'd studied the current players and were aiming to leapfrog the competition. However, there's been significant innovation in the space this year, and they enter a crowded field (more on that tomorrow).

At this point, I can't say anything more specific about its plans, but after it becomes publicly available we'll be back with a full analysis. 

Like Rate Surfer, which we wrote about yesterday, Expensify launched its new employee-expense management system from the TechCrunch50 DemoPit this week.

The San Francisco-based startup (note 1) combines a payment card with a web-based expense manager and uses cellphone cameras to upload pictures of receipts to match against purchases. It's a banking triple play: card, online, and mobile.

The target market is smaller businesses that want to automate expense report preparation, approval, and reimbursement to their employees.  

How it works
The heart of Expensify is a prepaid decoupled credit card. I know that doesn't makes sense, here's how it works: 

1. Sign up for an Expensify MasterCard prepaid debit card.
2. Load it with value from any credit or debit card, Visa, MasterCard, or American Express. 
3. Make purchases with the Expensify MasterCard.
4. As each purchase clears, it lowers the prepaid balance, triggering an automatic "top off" charge of an equal amount to the consumer's credit card thereby returning the prepaid balance back to the original level.

Metabank is the issuer, here's the terms and conditions.

Analysis
At first blush Expensify sounds pretty amazing. An expense management card that rides on top of your regular card, with mobile and web-based integration. Brilliant, until you start thinking about costs. There's that pesky thing called interchange. What Expensify has done is create two card transactions instead of one, doubling the amount of interchange paid.

To cover the extra interchange and create some revenue for itself, Expensify levees a 3% transaction fee on the cardholder. Although, the card is otherwise relatively fee-free, that's a significant surcharge.

Why would anyone pay 3% extra in order to use the Expensify card when they already have a credit card? The company believes that small businesses will pay the fee in order to get the expense manger features and to help employees separate business expenses from personal ones. Businesses could have multiple Expensify cards tied to different category of expenses (see screenshot below).

A business with just $1000/mo in expenditures would pay $360 per year. In addition, the business would tie up several hundred dollars in a prepaid account because cardholders can only make charges that do not exceed the prepaid balance held in the Expensify account. 

I think the expense management concept is good, especially with the mobile receipt integration. But it's just too expensive in its current format. The founders should try to move to an ACH-based "topping off" process and remove the transaction fees. 

But regardless of how this specific product performs, the integration of payments, online and mobile is a huge trend. If Expensify is nimble enough, they may be able to ride the wave.

Expensify homepage (10 Sep 2008)

Note:
1. Since I didn't see contact info on their website, here's what the founders provided at TechCrunch50: Expensify, 548 Market St. #61434, San Francisco, CA 94104, Phone: 801.745.9064

Two huge tech conferences opened today in California with 124 companies launching new products this week in front of a combined audience of more than 2,500 (see note 1). At DEMOfall in San Diego, 72 companies are launching new products today and tomorrow. In San Francisco, 52 companies launch at TechCrunch50 today through Wednesday.

Eight of the 124 companies are related to financial services:

• DEMOfall: Rudder, GreenSherpa, BizEquity (Advanta)
• Techcrunch50: iThryv (below), StockMood, PersonalRIA, exchangeP, and Emerginvest

We'll cover several of these companies, plus several in the TechCrunch50 demo pit, starting with iThryv.

iThryv kicks of TechCrunch50
I made it down from Seattle this morning just in time to catch the first demo. And I'm glad I got up so early because it just so happened to be the only personal finance/banking-related finalist. Oklahoma City-based Shryk, kicked off TechCrunch50 (note 2) by unveiling its online banking platform aimed at the 12-to-20 year-old crowd. The new service is called iThryv and it will be marketed directly to banks and credit unions who will customize and brand it for their own customer base.

iThryv will be integrated directly to the bank, or its core processor, so that real-time banking data can be displayed in various widgets. In to account info, iThryv also includes the following modules and features:

• Goal-oriented savings, including rewards for reaching milestones
• A spending & savings score that does for savings what a credit score does for loans
• Make $ area where budding entrepreneurs can learn more about starting a business
• Learn area for financial education

The company has a two-fold approach to getting iThryv into the market:

• Licensing the platform to banks for a fixed fee plus per-user fees
• Giving the platform to schools to incorporate into their curriculum

According to the founders, the service is currently being considered by  several financial institutions, but it is not yet available online.

iThryv homepage (8 Sep 2008)

 iThryv savings score graphed (8 Sep 2008)

iThryv "Make $" tab (8 Sep 2008)

Notes:
1. TechCrunch reported approximately 1,700 attendees, while DEMOfall had 800.

2. iThryv was originally scheduled to present third, but were moved up to first when Ashton Kutcher was late for his scheduled demo of his startup Blah Girls.

Last September, we wrote about the launch of Washington D.C.-based Pertuity Direct. At the time, the startup was showing some interesting social-personal finance tools such as Dare to Compare, which allowed users to compare their financial situation to their peers and national norms (see "before" screenshot below). It looked like another online PFM play.

But, it turns out the company's true business model is person-to-person lending (aka social or P2P lending) where it will compete with Prosper, Lending Club, Loanio, and others (see note 1). Its URL redirects to a non-functional placeholder page (below) that includes only an email signup (note 2).

Here's the company description of its strategy:

Pertuity Direct is bringing the next generation of social lending to the Web - integrating simplicity, liquidity and automatic diversification into the social lending model.

The founder is Kim Muhota, an ex-banker out of PNC Bank. Pertuity Direct, which is currently closed to the general public, will demo its new product at our October Finovate conference.

Current: Pertuity Direct placeholder page with email signup
(26 Aug 2008)

Before: Pertuity Direct website before redirect put in place
(see note 1, 26 Aug 2008)

Notes:
1. For more on the P2P lending space, see our Online Banking Report on Person-to-Person Lending.

2. You can see the previous website content by following a deeper link available from Google.

Intuit joined the messaging race with the beta release of Quicken Beam. The free service sends users text-messaged balance-and-activity alerts from most U.S. bank, credit card, and credit union accounts. Users may also query the service for balance plus last five transactions by texting "Bal" to the short code 636363.

Currently, the service runs independently of Quicken and can be used by anyone free of charge. According to the official press release, the service was developed in Intuit Labs.

What's innovative
It's not a new feature. Quicken Online (see second screenshot below), along with most major banks and personal finance specialists (Mint, Rudder, Wesabe), already support text-message alerts (see note 1). But this is a relatively low-cost way to hook users early on with an extremely simple service, then migrate them to more robust Intuit services later on (Quicken, QuickBooks, TurboTax).

And the Quicken stamp of approval means a lot when turning over your log-in credentials to a third party. If you want to talk to the company about Quicken Beam, Intuit will be demo'ing the latest features of Quicken Online at our Finovate Conference in October. 

Financial institutions that lack text-message support might consider linking customers to Quicken Beam. Yes, you are turning customers over to another financial provider, and yes, your compliance folks will hate it. But customers are going to do it whether you want them to or not. You might as well get credit for making a solid recommendation. And realistically, using Quicken Beam is unlikely to hasten anyone's exit from your bank or credit union.

Qucken Beam homepage (25 Aug 2008) 

 Text messaging in Quicken Online (25 Aug 2008)

Notes:
1. Geezeo really differentiated itself with mobile capabilities in its May 2007 launch. 

2. For more information, see our Online Banking Report on Personal Finance Features.

There's a new challenger in the online PFM space, aptly named start-up Rudder which is headquartered in Houston, TX (see note 1). The company was founded in 2007 and launched last year under the name SpendView (note 2).   The company raised $2 million in January from Meakem Becker Venture Capital. The founder is Nikhil Roy. 

What's innovative
While it's a bit busy for my tastes, Rudder's homepage is aesthetically pleasing, and more importantly, lays out a number of remarkable benefits that every financial institution should be able to deliver on:

• Finances in your inbox: emphasizes that it's pushing info to you, not relying on your obsessive monitoring of a website
• Paying bills on time: They don't just help you pay the bills; Rudder makes sure you pay them ON TIME, a huge difference in terms of consumer benefits
• Think forward: Everyone has a sense of what they really have in the bank after upcoming expenses are met, but Rudder actually does the math for you and shows you what's truly "free cash" in your account after accounting for upcoming payments
• Every morning: Rudder provides a personal-finance heads-up each morning so you can go about your day without thinking about your finances
• Safe & secure: Self-explanatory, but cannot be overlooked

Clearly, Rudder has been studying how Mint grabbed an early following with great design, advanced functionality, and a brash point of view. However, it won't be able repeat Mint's PR coup last year of winning at TechCrunch40 and our Finovate 2007 (see note 4). Rudder has scheduled its public debut at competing techfest, Demo Fall, running Sept. 7-9 and unfortunately were not on our radar screen until after the Finovate 2008 lineup was set (note 5).

What it means
You gotta love Web-based startups. It took a decade for Wells Fargo to move from delivering plain old statement info on its website to offering rudimentary personal finance functionality in My Spending Report.

But less than two years after Wesabe (note 2) kicked off the Personal Finance 2.0 era, we have dozens of cool personal finance companies looking to make a name for themselves. Mint (note 2) is the most hyped (see coverage), but there are also great things going on at Geezeo, Jwaala (note 3), Buxfer, ClearCheckbook, Mvelopes, and, of course, Quicken Online, which has Coke-like brand awareness.

And don't rule out the incumbent financial institutions. PNC Bank (post here) and Frost Bank (post here) have both introduced novel accounts that incorporate advanced personal finance functions. And Bank of America has offered full-service PFM functions since late 2006 with Yodlee-powered MyPortfolio.   

Rudder homepage with five key benefits highlighted (21 Aug 2008)

Your "real" balance widget
I love the focus on what you really have in your account, after netting out all the known bills in the coming month. Here's the graphical feedback Rudder provides.

Notes:
1. Rudder seems like a good name for a financial management app. What do you think Jeffry?

2. The previous version, SpendView, is still live at <spendview.org>, but the original spendview.com now redirects to rudder.com.

3. See Wesabe and Mint demo their latest features at the upcoming Finovate 2008. Mint won Best of Show at Finovate 2007.

4. Jwaala was Best of Show winner at Finovate Startup, April 2008.

5. Attention startups: It's never too early to make an introduction and get on our Finovate watch list. We're already putting notes together for 2009. Contact Online Banking Report/Netbanker editor Jim Bruene. 

6. For more info on the space, see our Online Banking Report on Personal Finance