We're pleased to welcome Wesabe as a new sponsor of NetBanker.

Wesabe is, in their own words, "a community of real people dealing with real money issues."

They describe themselves as building "easy-to-use, Web-based software" that "gives members a better understanding of how they spend money" plus the "Wesabe community shares tips and advice to help each other make better financial decisions."

Wesabe is currently promoting introductory pricing on their new Wesabe Springboard product which is "designed specifically for banks and credit unions that want to add personal finance management (PFM) tools to their online banking sites." It includes features like online signup, instant availability, and easy integration.

Please consider checking out Wesabe Springboard if you're interested (you can also watch their demo video of it from the spring 2009 Finovate conference here).  

Thanks! Now back to our usual blogging.

Today, Wesabe (company blog post) joined Geezeo (press release) in officially pursuing a strategy of white-labeling its personal finance services for banks and credit unions (note 1). Wesabe CEO Marc Hedlund told me they have three deals in various stages of the contract process, but none have signed on the dotted line yet.

You can get an idea of how this will play out by visiting Wesabe's first co-branded site at the UK's Daily Telegraph (see screenshot below). However, in the banking rollout, the service can truly be white labeled with no mention of the Wesabe name. Wesabe provided a mockup of its white-label product for the fictitious Springboard Bank (see second screenshot below).

As much as I love online PFM sites, the future for most financial management activity is within the confines of online banking sites (note 2). Why? Most people do NOT enjoy tagging purchases, tracking their budget, monitoring their net worth in real-time, or debating the latte factor.

Banking, like most chores, needs to be accomplished as efficiently as possible. And the easiest way to track financial activity is at the place the customer already knows, trusts, and uses, their online banking site (note 3). 

That doesn't mean there isn't a place for Mint, Quicken and other PFM sites. Millions of consumers and small businesses pay close attention to every transaction. And they'll invest time, and money, into standalone sites that offer state-of-the art tools and independent perspectives.    

But by partnering with full-featured PFMs like Wesabe, banks and credit unions give customers little reason to look elsewhere. Wesabe is particularly well-suited for the role of financial institution service provider (note 4):

• Technology: It owns the aggregation engine, so they have more flexibility in pricing and contract negotiations
• API: Wesabe has featured a public API since 2007, so it's easier for bank developers to hook into its rich dataset
• Features: Has state-of-the-art user interface including a Twitter interface, widgets for Mac and Windows Vista, an iPhone-optimized site, and soon an iPhone app
• Brand: It has taken the high road....positioning the Wesabe brand as an unbiased financial guide; in fact, they've never taken advertising or commissions from financial providers
• Experience: Launching in 2006, they have been around longer than most other players, giving them credibility and a better longitudinal database
• Traffic: Of independent PFM sites (see Jan. traffic here), Wesabe trails only Mint and Geezeo in monthly traffic (120,000 unique visitors in Feb according to Compete), so it brings an established community and financial database to their financial institution clients

Make vs. buy
For a financial institution, the advantage of working with Wesabe vs. building PFM capabilities in-house include:

• Speed to market: Outsourcing allows FIs to get the PFM features in to the market much faster; depending on level of integration, could launch in a few months
• Integration: Although young, Wesabe is an experienced aggregator and technology company; this expertise can be tapped to provide integrate bill payment and funds transfer capabilities
• Existing community: FIs can leverage the vibrant Wesabe community to instantly provide interesting content and community
• Cost savings: Gives the financial institution state-of-the-art features much faster, and usually at a lower cost, than building them in-house

Wesabe's co-branded site at UK's Daily Telegraph (link) (18 March 2009)

Wesabe mock-up of white-labeled PFM interface (18 March 2009)

Notes:
1. Wesabe's new service is called Springboard and Geezeo's is Spectrum.
2. Assuming banks and credit unions offer a reasonable set of personal finance management tools.
3. For more info, see our Online Banking Report on Personal Finance Features for Online Banking and Online Banking Report on Social Personal Finance.
4. Geezeo also boasts similar benefits; while it's a year younger and doesn't own the aggregation engine, its provider, CashEdge is already used and trusted by many large financial institutions, and Geezeo boasts higher traffic than Wesabe. 
5. Come talk to Wesabe's execs at our FinovateStartup 2009 conference, April 28 in San Francisco.

I love personal financial management websites. Not so much for the reality, actually I hate tracking expenses, but for the promise. The illusion of having everything under control, never overdrafting, never missing a payment, and with perfectly-shaded multi-color pie charts just a click away (inset from Mint). 

But I've always thought that once banks and credit unions added basic PFM functions to their online banking services (see note 1), it's game-over for most independent PFM sites. They would have to either license their platform to financial institutions, sell out, or close their doors.

Now I'm not so sure.

Mint did something recently that made me reconsider. It was really pretty simple when you think about it. Yet as far as I know, no bank, card issuer, or even credit union has ever taken this on. 

The Mountain View, CA-based startup scanned their members' credit card statements to identify bogus charges from a known scam. And the company plans to make the resulting fraud alert service a standard part of its offering.  

From American Banker (23 Jan 2009):

Mint Software Inc. is planning to roll out a tool that will automatically scan its 800,000 users' accounts for potentially bogus charges....Aaron Patzer, Mint's founder and chief executive, said the idea for the new product came after his company heard of a scam involving Adele Services of Melville, N.Y., a bogus merchant that was making 25-cent charges to millions of consumer accounts. The news was widely reported, and Mint decided to check its users' accounts its to see if any had been affected; it found 800 that were.

Score 1 for the upstarts.

Bottom line: If the online PFM purveyors harness technology to take better care of banking customers than the banks themselves, especially with practical, money-saving ways such as Wesabe's Cutback Tool (below), the newcomers have a bright future indeed.

Note: For more info, see our Online Banking Report on Personal Finance Features for Online Banking.

January is always a great month for personal finance. Consumers working off holiday spending binges and/or attempting to live up to New Years resolutions naturally find their way to personal financial management sites. It's especially pronounced this year as consumers try to better understand their spending and manage for the downturn.

So it's not surprising to see that traffic grew by 300,000 unique visitors in January (+20%) compared to December. Total traffic was up 4.5-fold at sites open for a year or more (see Table 1). Including the class of 2008, total traffic was 2.0 million, a five-fold increase from a year ago.

Highlights:

• Mint had another great month, increasing site visitors by about 200,000, a five-fold increase in the past year. Mint's gain in January was more than that total traffic of all nine 2008 newcomers combined. Mint had a 60% market share of the total of 1.8 million visitors in the category, about the same as December. 
• Geezeo continued its wicked pace, growing 30% during the month, and posting a 12-fold increase over a year ago.
• Quicken Online, which launched in January 2008, more than doubled visitors to 150,000 compared to December. However, traffic at Quicken is hard to compare to other sites due to the massive traffic at its parent site: for example, <quicken.intuit.com> received 1.2 million visitors and <intuit.com> website had more than 10 million. 
• Wesabe was the only site, of those open for a year or more, that turned in a traffic decline, falling more than 30% in the month. However, keep in mind the Compete estimates are derived from an online panel and are not always accurate, especially for sites in the low six-figures or less. The company said that it had record page views in January. That includes both U.S. traffic, measured by Compete, and international visitors.
• BudgetTracker also turned in amazing results, nearly doubling its traffic to an estimated 27,000 visitors.
• Of the 2008 startups (see Table 2), Thrive was the only one showing strong growth, increasing 50% over the previous month. On Friday the company was acquired by Lending Tree for an undisclosed amount.

Table 1: Traffic at online PFMs launched more than one year ago

Table 2: Traffic at the online PFM class of 2008

Source: Compete, 7 Feb. 2009; estimates of monthly unique visitors from the United States

*The percent changes were calculated from the underlying data set and due to rounding of the monthly traffic figures; the percentages may look slightly off

Note: For more information on the market, see our Online Banking Report on Personal Finance Features and Online Banking Report on Social Personal Finance.

As I was drilling into the latest Compete traffic numbers for the annual Online Banking Report planning issue, I noticed a significant uptick in traffic to online personal finance specialists, almost across the board.

Sept. traffic revealed a total of 1.2 million unique visitors (note 1) compared to less than 400,000 a year ago. Not surprisingly, consumers appear to be taking a closer look at their finances. 

The big three newcomers last year: Mint, Wesabe, and Geezeo saw combined traffic increase by 450,000 users, a nearly three-fold increase from 2007. Geezeo was the star percentage-wise, growing more than six-fold. But Mint accounted for three-fourths of the net gain across the existing players with 330,000 more visitors (see Table 1 below):

Also, two newcomers made a big splash last month:

• PNC Virtual Wallet launched in July (coverage here) by PNC Bank, which trailed only Mint last month with nearly 140,000 unique visitors (see 2 below).
• Rudder (a relaunch of Spendview) drew 50,000 visitors last month after its launch at DEMOfall in early Sept.

Granted, the PNC Virtual Wallet benefits enormously from the 2 million monthly visitors to parent PNC.com and PNCBank.com. Yet, it's still an impressive total and is encouraging for banks and credit unions considering similar efforts.

Table 1: Online PFMs launched more than 1 year ago

Table 2: The online PFM class of 2008

 Notes:

1. Sum of the monthly unique visitors from all PFM companies, visitors that went to more than one PFM provider are not eliminated from the total, so there is double counting in the totals. Data source is Compete, pulled 21 Oct 2008.

2. Rudder was previously Spendview, but we consider them to be essentially a new company.

Wesabe's latest feature, the ability to update your account via Twitter, isn't likely to find too many users in the short-term. However, it's a great marketing move that could see a fair amount of uptake over time (see note 1).

Although there are less than 2 million Twitter users, the company is currently white hot, one of the most talked about Internet companies (see Google trends below, which shows Twitter search volume is 7x or 8x that of "phishing"). So why not draft off Twitter's hype, as long as it's not too costly?

How it works
After logging in to Wesabe and providing your Twitter name, you then simply send a private or public message (aka Tweets) to Wesabe's Twitter account. Wesabe then adds the expense to your cash-tracking account. You can include merchant name, expense categories, and descriptions to the transaction (see examples below).

Most common: Update via private message (no one else will see)

Less likely: Update via public message (your friends will receive it, and if you have an open feed, anyone could see it)

Google Trends for Twitter vs. phishing (9 Aug 2008)

Note:
1. Updating accounts via text message and email has much wider appeal. It's one of the recommended items in our personal finance feature set. See our Online Banking Report on Personal Finance Features for more info.

Two months ago we published a table (here) showing active users at the leading online personal finance startups. Below is the table, updated with March traffic and the addition of one more player: Bank of America.

The bank, which offers a full-featured online personal finance management solution called My Portfolio, powered by Yodlee, has 2.5 million active users, according to BofA exec Marina Moore (note 3). That's an impressive 10% of the bank's online user base, and about 6x the total user base of all the online startups combined (note 4). 

For more information:

• Online Banking Report (131/132): Personal Finance Features for Online Banking
• Online Banking Report (142/143): Social Personal Finance
• Our FinovateStartup Conference April 29 in San Francisco, where Buxfer, Expensr, Jwaala, Mint, and Wesabe will present the latest in online personal finance features

Notes/Sources:

1. Users: per BusinessWeek Online, Feb 2008, figures are reported by the companies and may include inactive users; Mint has been updated to 180,000 from 130,00 based on new figures reported in the Bank Technology News article published in April 2008

2. Traffic: per Compete estimates of website traffic for March 2008, retrieved April 21, 2008. Compete estimates traffic from its online data and can be off by a factor of two or three-fold for smaller websites.

3. As reported in a Bank Technology News article published in April 2008.

4. This table does not reflect all the players, such as Intuit's new Quicken Online, just the ones highlighted in the BusinessWeek article.

In a Feb. 11 BusinessWeek Online feature (here), reporter John Tozzi listed the self-reported user bases at seven new entrants in online personal finance. The roundup led with an anecdote about Wesabe CEO Jason Knight answering phone calls from users (see inset).

The seven companies listed below are only a subset of the online personal finance space. The list does not include users at Quicken Online, Yodlee, Mvelopes, and another two dozen smaller players. Nor does it include users at financial institutions that support online personal financial management such as Bank of America, Wells Fargo, Key Bank, River City Bank and others.

Sources: Users per BusinessWeek Online, Feb 2008, figures are reported by the companies and may include inactive users; Traffic: Compete, Inc, estimated unique visitors for January 2008

*Will be presenting at our FINOVATE Startup conference April 29, 2008

For more information:

• Previous NetBanker coverage here
• Online Banking Report #131/132: Personal Finance Features for Online Banking
• Online Banking Report #142/143: Social Personal Finance

Last week’s Net.Finance conference entitled Online Innovations in Financial Services Marketing brought thought leaders together in New York to examine trends and breakthroughs in the world of banking.

For me, there was one clear take away: The new social tools that allow people to connect with each other online are ushering in a new economy.

We are moving into a social economy, where collaboration and participation between and among consumers will sway their choices more than marketing messages do. Those companies that enable social participation, add value to people’s lives and create authentic experiences for their customers will lead in this new economy. There were other topics discussed, but this theme kept creeping into the presentations and conversations in a way I had never before encountered. I’m going to narrow in on this one theme, which ran throughout the two days of the conference, and I apologize to those companies and speakers I’m not highlighting here.

Jurie Pieterse – ING Direct
Jurie outlined several of the key ways that ING is handling the power of its marketing and messaging to consumers by opening up its brand to customer participation. It is clear from ING’s early experimentation that it has a brand with strong emotional appeal and resonance. The bank opens the doors to people who engage with the brand to create photos, videos and prose about how their relationship with ING helps them manage their money.

Jurie explained that when they delivered the prizes in their user-generated content contests, which ranged from $1,000 to $15,000, most winners said that they entered the contests more from a sense of fun and participation than for the money. After this initial experimenting, ING will begin to examine the data to determine if these contest entrants are more loyal and profitable than less engaged customers. I would bet my Electric Orange account they are.

Chris Larsen – Prosper
It is fascinating to watch Prosper evolve their model. Chris spoke at length about the importance of social capital to improving its default rates. The idea is that people who have peer pressure built into their borrowing habits will pay back at a better rate than they do to traditional financial institutions.

Prosper has found that people who receive at least one of bid from friends or family have significantly lower default rates than those who only borrow from strangers. By leveraging this social capital, the entire community acts more honestly, even if lending to friends and family is a small part of the overall equation.

Jason Knight – Wesabe
Jason sees Wesabe as a community of interest focused on money. By allowing members to tag their financial transactions and share whatever information they choose with the greater community, they create a collective intelligence I find very exciting. I see them as the long tail of financial advice. People discuss better ways to use their money, from smarter investing habits to buying better cuts of meat. All of this collective intelligence fuels a social economy where people rule their situation by having a much healthier relationship to the way they spend their money.

Shari Storm – Verity Credit Union
Shari oversaw the creation of the first “bank” blog, which Verity started in 2004. She has strong information and advice to other FIs considering jumping into the world of blogging. It is clear that the blog is an excellent way to humanize the company and engage with their community in an honest and transparent way.

Thomas A. Desmond – TradeKing
I was blown away by TradeKing, a company I had not heard of before. Their marriage of social tools inseparable from their trading platform is perhaps the very best example of social media being used strategically by a company that I have seen.

They have baked community aspects into everything that happens on their site, so, if traders opt in to the community, they can learn from each other based on their actual trading results (similar to Zecco.com, below)

Asheesh Advani – Virgin Money
It took me a minute to wrap my head around Virgin Money’s model, but once I got it, I was hooked. Many people who buy houses get side loans from friends and family to make a bigger downpayment. Same with student loans, or with unsecured personal or business loans. Virgin creates a model around this kind of lending, so both sides can take advantage of the tax benefits available via a documented lending relationship. It creates excellent flexibility, because if a borrower needs to skip payments, the lender can adjust the loan accordingly. The loan can always be turned into a gift at a later date. This takes a part of the social economy which was underground and unseen, and brings it above board, recognizing it as an important part of the overall economy.

Gabriel Dalporto – Zecco.com
Zecco and TradeKing's models have many similarities (one exception being that Zecco offers 10 free trades each month). Community features are built right into the tools making it easy to track individual investors within the community. That allows the higher performers to gain a following and for newcomers to learn from the veterans. Like TradeKing, Zecco allows community menbers to see the actual trading results and portfolio holding of members (that have opted in), adding an enormous amount of credibilty to discussions about individual stocks and trading strategies.

Summary
It feels more and more to me that we’re at a turning point. I admit that these innovations are small, just barely bubbling up to the surface. But I believe these examples of companies quietly tapping into unmet needs provide a model of the future.

Anyone working at a financial institution who wants to understand the potential opportunities and threats coming our way should watch these companies and understand their models. If my experience is any indication, the social economy will begin to trickle into your FI's strategies and executive discussions and those who best understand these concepts can help inform, influence and shape the outcome.

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 builds on a decade of experience at digital agencies in Vancouver, Seattle and Los Angeles driving strategy, extending brands to the Web and building relationships for companies in several verticals, including Honda, Disney, Intuit Canada and the Government of BC. He discusses trends and noteworthy achievements in social media at his blog: azaroff.com/blog.

We first discussed the usability advantage of direct-to-the-desktop information delivery in the 1998 Online Banking Report, Creating the Amazon.com of Financial Services  (see note 1). We called it a "meter" instead of today's widget or gadget, but its essential function was to show balance levels on the user's PC without requiring a login each time.

Last week, Wesabe became the first company to implement that concept with its Mac Widget shown below (Wesabe link here). The widget displays the balances in the various accounts tracked through the company's personal finance platform:

Several other personal finance companies have previously launched widgets including ClearCheckbook which released a Google Gadget on March 14 (here) and  Mac Widget a few days later (here). Other financial widgets are offered by billQ, Buxfer and Mortgagebot (see previous coverage here and here).

However, Wesabe is the only one streaming real-time balance updates thanks to its automated downloading of account data from linked financial accounts (aka account aggregation). Without the automatic updates, a widget is more window dressing than functional tool.  

Therefore, we're giving Wesabe its second OBR Best of the Web this year in recognition of its new widget which once again raises the bar for financial information delivery (note 2), if only for Mac users. 

Notes:

1. We last covered desktop technologies in a 2002 Online Banking Report, Grabbing Desktop Mindshare (# 85).

2. Recent OBR Best of the Web winners are covered here. Five awards have been handed out this year: two for Wesabe, and one each for Jwaala, Buxfer and Obopay. In the past 10 years, 67 companies have won Online Banking Report's Best of the Web awards. Only five companies prior to Wesabe have won the award twice: Bank of America, Citibank, E*Trade, Everbank, and Wells Fargo.

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.

This past week, two Web-based personal finance firms, Wesabe and Billeo, have announced feature upgrades (Wesabe release here, Billeo here). One common thread: the ability to easily capture screen images of ecommerce transactions and file them for later reference (note 1).

The time-saving feature was added to Quicken several versions ago, but it's still not yet supported at any financial institution or credit card issuer (see Online Banking Report: Personal Finance Feature for Online Banking here). While it won't change the world, it sure eliminates one of life's little hassles, the decision each time you transact online as to whether you really should "print out this page for future reference" (and where to store the pesky printout if you do.)

How image capture works today:

1. Pay a bill or purchase something online.
2. At completion of the transaction, select "browser snapshot" from Wesabe's drop-down menu or "save & file" from Billeo's toolbar (see screenshots below). 
3. The image of the transaction confirmation screen is stored within the personal finance area and is available for future reference should there be a problem with the transaction; since it's stored as an image file, it can easily be emailed to a disbelieving customer-service agent. Billeo includes a "forward" button in its vault to make it even easier.

How image capture can be enhanced in the future: 

1. It will automate the transaction-reconciliation process, scraping data from the confirmation screen and automatically verifying that the transaction was processed against the user's bank or credit account properly.
2. If not, an email/text alert will notify the end-user of the potential problem.
3. A template could be provided for communicating with the merchant to rectify the problem.
4. The scraped transaction data could also be run against a tagging engine to add very specific transaction tags, e.g., the purchase at Amazon could be split into x dollars for music, y dollars for housewares and z dollars for housewares.

Billeo's Screenshot Capture Feature
To save a screenshot of a payment confirmation, or anything else, users select the shopping button on the Billeo toolbar. That causes a popup to appear (see inset for closeup) where the user selects the bank/card account, enters a transaction description if desired, chooses a page type, selects the correct purchase amount from the values scraped from the screen, and edits the date paid if necessary.

Billeo popup provides users a method of capturing payment details along with the screenshot of the page

Page viewed later in the transaction records
Users can view the transaction and/or image file later in two Billeo areas: My Vault (not shown) and MyBills (below). Mousing over the paperclip launches a thumbnail of the page; clicking on it launches a full-size view of the page.

Wesabe's Screenshot Capture Feature
To save a screenshot, users click on the Wesabe button on the Firefox toolbar. A few seconds later, the screenshot loads (second screenshot below) and users choose whether to "upload to Wesabe" or "save to disk" or both. After the picture has been saved, the user closes the screen. In our test, save-to-disk worked as expected, and it was easy to retrieve the file through Windows Explorer. However, although the upload to Wesabe seemed to work, we couldn't figure out how to access the uploaded screenshots within our Wesabe account.

Closeup of Wesabe tool

 

Full screenshot of page after launching Wesabe screenshot uploader

Note:

1. Billeo has supported page-capture since its 2005 launch, but it was not integrated into the payments-transaction register.

Two potentially disruptive startups, Prosper, the leader in U.S. P2P lending and Wesabe, the first-mover in social personal finance, both announced new funding rounds today:

• Prosper took in $20 million, bringing total funding to $40 million (previous coverage here)
• Wesabe added $4 million to its bank account, bringing its funding to $4.7 million (previous coverage here)

These are sizable bets on on niche markets that haven't thrown out a lot of revenues so far. But whether they succeed or not, the money will certainly fund additional innovations that will be educational for those in the banking industry. 

Case in point: Wesabe launched an app on the Facebook platform, becoming the first personal finance company to do so (screenshot below). So far it's a simple front door to their group discussions, but with more development resources, it could become a full-fledged "bank" running within the Facebook community.

For more information on Wesabe refer to our latest Online Banking Report, Social Personal Finance (here).     

If you are interested in online personal finance, you'll want to read tomorrow's feature by the Wall Street Journal's Jane Kim, Managing Your Money in Public View (here). It's an accurate and almost entirely positive story that includes interviews from four satisfied users: two from Wesabe* and one each from Geezeo and Buxfer. 

Wesabe definitely gets top billing, as it should as the leader in the space. In addition to Geezeo and Buxfer, the article also mentions BillMonk/Obopay, Zecco, NetWorthIQ, and two new stock-trading-oriented social sites, TradeKing and Covestor. The only major omission is Mint, not because they were overlooked, but because they are not yet public. See here for our previous coverage of online personal finance.  

The market-size forecast cited is from the latest Online Banking Report, Social Personal Finance (discussed here and here).

One side note that I found interesting: The article included a disclosure that the paper's parent, Dow Jones, is working on a personal-finance site with IAC/Interactive Corp, parent of LendingTree, GetSmart, mortgage lender HomeLoanCenter.com and RealEstate.com. It will be very interesting to see what comes out of that effort.

---

*Wesabe was on top of this story, posting it to their blog earlier this evening.

Last week, I promised to provide more details on the conclusions in our latest Online Banking Report, Social Personal Finance: Will social networking revolutionize personal finance? It was mailed to subscribers last Friday, so it should be making its way through inter-office mail as we speak (or download here). 

Here are the major themes/conclusions from the report:

1. Social networks are the new main street; so banks that want to be where their customers are should NOT ignore social networks.
2. There are many ways to bring social networking concepts into mainstream banking sites, for instance blogs and forums allow conversations to take place with both customers and employees participating.
3. The leaders in the space now are startups such as Wesabe and Lending Club. But what they gain in social networking savvy, they more than give back in lack of trust. So financial institutions are still incredibly relevant in social personal finance.
4. In the future, social networks may become so trusted that they can function as a virtual credit union, bringing together members to provide each other with financial services (e.g., P2P lending) or using their clout to negotiate deep discounts with financial providers (e.g., affinity credit cards).

 Social personal finance innovators profiled in the report include:

• Buxfer -- Named OBR Best of the Web in the report for several pioneering features, including login via third-party APIs, transaction input via email, file appending, Google gadget, and budget alerts
• Wesabe -- Also named OBR Best of the Web for its integration of personal spending records with the wider community

We also looked at Mint, Geezeo, Lending Club, Wells Fargo, and Intuit's new Personal FinanceWorks and Small Business FinanceWorks.

----

For more information on the report see the landing page here or download the abstract here. And for Colin Henderson's take at The Bankwatch, go here.

You know you have it made when your company becomes a verb. Everyone on the planet knows about Googling. Then there is MapQuesting directions to the party, Yelping the best Thai food South of Market, and in financial services, Zillowing the house down the street. Someday, you may Wesabe your wireless provider to see how much users spend there and how they rate the experience.  

At least that would fit the vision of Wesabe co-founder and CEO Jason Knight, who I caught up with over coffee yesterday in Seattle as I was putting the finishing touches on a report on Wesabe and other so-called "social personal finance" companies (note 1).

I came away with a new respect for what Wesabe is trying to do. They are not so much looking to be a Web-based Quicken, as I assumed; but more a Quicken/Google mashup, delivering consumer insights by finding meaning in millions of consumer purchases. Overall, it's more like what Google does with a billion Web pages, than what Quicken does with a few thousand transactions (for each user). 

But unlike Google, which can crawl websites at will, Wesabe must convince consumers to open up their spending files to the equivalent of a search engine crawl. To do that, Jason says that Wesabe "must make financial information interesting (to its users)" while also making it drop-dead simple to upload data to Wesabe.  

No easy task. But Wesabe seems to have a head start on making that happen. More on that in our full report (see note below).

Note:

1. Our next Online Banking Report, Social Personal Finance, will look at the entire sector. You'll find it here next week. It will include a detailed look at Wesabe and Lending Club, which is catering entirely to Facebook users (see post here), and what banks should do to compete and/or partner with this new type of financial provider.

The players: An angry and articulate Wachovia customer with the online handle haberschmidt; Wachovia Bank; Wesabe; PaymentsNews

Synopsis: According to an anonymous online posting, Wachovia charged a customer $245 in overdraft fees on seven transactions, at least a few of which were signature debit. The customer claims to be a practicing attorney with an undergraduate accounting degree and Ivy League law degree who deposits $8,000 per month into his Wachovia checking account. Unfortunately for the bank, he/she also took the time to research the incident and document it in a 1,500-word comment at personal fiance site Wesabe (see inset).

In the pre-blog days of the Internet, the post would have been read by a few dozen readers and cost Wachovia nothing, other than the attorney's business. However, the so-called blogosphere can amplify these isolated incidents a thousand-fold.  

Timeline:

???: Wachovia charges "haberschmidt" $245 in overdraft fees on seven low-dollar transactions, many made by signature debit (see note 1)

???: Haberschmidt spends an hour and half with Wachovia customer service reps to understand the process. Ultimately, he/she has the fees reversed by the branch. 

April 27: Wesabe user "haberschmidt" documents Wachovia's overdraft policies in a 1,500-word comment to a thread on bank fees at Wesabe (here) (see inset above and note 2) and says he or she is closing their Wachovia accounts

April 27, 8 PM: Wesabe blogger Marc Hedlund highlights the issue in the Wesabe company blog (here) under the proactive title, "More on How Banks Maximize Your Overdraft Charges" and adds a few more digs on overdraft fees

April 28, 6 AM: Scott Loftesness, after seeing Wesabe's post, broadcasts it to the payments world via the PaymentNews blog (here)

Future: It's possible the story dies now, but with Google prominently displaying blog posts, the story will likely be visible through searches for years to come. However, the real damage occurs if the mainstream media picks up on this story, possibly precipitating one or more negative stories on debit card authorizations and/or creative engineering of transaction-processing algorithms to generate more fees.

Analysis:

Before the Internet, if a customer was really mad, 10 to 25 people might be told, and those people could pass it on, but the damage was likely limited to that close-knit group.

After the Internet, but before blogging, if a customer was really mad they might comment on a popular blog such as FatWallet, and hundreds or even thousands of people might see it. However, in an anonymous online forum, the reader wouldn't be able to readily discern a one-sided rant from an actual problem. So, even though a few hundred people might read it, few would be moved to action. 

But today, the blogosphere can amplify a complaint a thousand-fold. Now, the number of readers could be in the tens or hundreds of thousands. The combined readership of Wesabe, PaymentsNews, and NetBanker is more than 10,000 already. And the blogs, with known authors, have far more credibility than random forum posts.  

What a bank should do:

1. I know this is going to hurt, but if you haven't done so already, take a hard look at your NSF/overdraft fee policies and program some common sense into the fee and check processing algorithms. As this incident shows, financial institutions risk a real backlash as the fees grow relatively larger and are applied to smaller dollar amounts, especially debit card charges that the bank had a chance to decline at the point of sale. Case in point: An article in Saturday's Wall Street Journal (here) had an example of a widow charged $30 for a $0.95 cent debit card overdraft AFTER her account was frozen (see note 1).
2. Educate customers on the tools they can use to minimize overdrafts such as online banking, email alerts, and if possible, text-message alerts.
3. Make sure every creditworthy customer has an overdraft line of credit. If they are credit-averse, use a savings account. In the Wachovia example, the customer apparently had an overdraft setup between two deposit accounts, but it didn't work because "Wachovia recently monkeyed around making administrative changes to my accounts and lost track of the overdraft protection feature." Had the customer, who sounds like he makes a six-figure income, been covered by a line of credit, he'd simply be paying Wachovia a few bucks in interest, instead of costing the bank thousands of dollars in lost income.
4. Use your CRM systems to apply logic to the overdraft-fee assessment. If you know a customer deposits his/her $8,000 paycheck on the 15th every month, don't ding them a $30 fee on the 14th for a debit card charge at Starbucks.
5. Follow WaMu's approach and give customers an annual "get out of jail free" card that allows them to turn it in for a no-questions-asked fee reversal on an overdraft.  
6. Put your chronic NSF/overdraft customers into an account with a prepaid model that does not allow them to go over the amount in their account. Access can be by debit card and good-funds bill pay, but regular paper-check access would not be allowed (sounds a bit like a certain new account named after a fruit here).

Final word:

Banks need to voluntarily reign this in before the class-action lawyers and politicians campaigning for '08 make this into a public-policy issue with a raft of new regulations. Haberschmidt closed his forum post with this chilling paragraph:

Although the branch corrected the overdraft protection issue and reversed the fees, I am closing my accounts. I believe strongly in voting with my dollars and I don't want to belong to a bank that takes advantage of its customers in this way. It strikes me as a predatory practice, and the kind of thing of which Congress should be aware when it reviews regulation on the credit card companies and other financial industry practices.

<Stepping off the soap box>. Now back to your regularly scheduled "happy marketing blog."

Notes:

1. The Wall Street Journal article (here), about how bill collectors are abusing the garnishment order system, should be required reading at U.S. banks and credit unions.

2. "Haberschmidt" is the user's Wesabe public ID, he/she joined Wesabe the same day he posted the comment.

3. The forum comment appears to be a genuine beef with Wachovia. However, it's extremely unusual to see a 1,500-word, well-written comment online, and closing with a call for Congressional action to boot. So it's possible haberschmidt has an undisclosed agenda, especially given that he joined Wesabe the same day he posted the comment. However, he immediately posted another comment apologizing for his typos and implying that he composed the whole thing in Wesabe's online forum. That makes it very believable, although it's still possible that this followup was also a calculated move. Even if it is a fabricated post, the underlying issue still needs to be addressed.