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Bloomberg: Citi and MSFT to compete w/ Mint.com

Citigroup, Microsoft Said to Plan Challenge to Intuit, Mint.com http://www.bloomberg.com/apps/news?pid=20601103&sid=ajESsHMx7eYU

Hmmm… I believe Brian found me from my Mint/Intuit note below. Hope I don’t come off as a radical. Citi must be successful.. US taxpayers are shareholders. Jeff is a great guy, and one of the most talented people I have ever worked with. I have no idea how Citi keeps hold of him. Perhaps it’s like joining the Army.

Citi/MSFT will obviously look to provide services to non customers and industry sources tell me that the account aggregation will be provided by Yodlee. There is some amount of irony here, as Citi’s customer’s had access to Yodlee’s services until September 2005. During my time at Wachovia customers loved the Yodlee service, but we had to end it due to cost and risk issues.

For Citi/MSFT a central challenge will be moving customers away from their bank to engage in activities such as budgeting and paying bills… and then transacting. (Remember Transpoint from MSFT…. it was close to the date when Gates said Banks were dinosaurs in 1994…) In the US, MSFT, Mint.com and INTU had trouble getting customers engaged seperate from their Banks. In the US, Mint had the fastest growth rate with a total of just over 400,000 customers. A figure not likely to strike fear in the heart of many banks, this combined with the Mint demographic seems to indicate that the customer base of “spenders” vs “savers” (hence the need for budgeting). This would seem to indicate a card focus for Citi.

Assuming a card focus, a short term need to generate revenue, offering customers a way to transact with Yodlee as a service provider.. I would see card based bill payment as a key service to be offered in this new Citi/MSFT venture. During my time at Wachovia we piloted the Yodlee biller direct service. The UI was fantastic… and that was 4 years ago. This service leveraged cards as the vehicle for bill payment through aggregation of the billers online payment interface. BAC also evaluated this service as a way to generate interchange revenue off of bill payment.

Hence, I would assume that Citi’s business case for NewCo is based upon the following:

Transacting. Both leveraging credit cards for a bill payment, and purchases. (interchange)
Market customers based upon transactional data (marketing)
Cross sell Citi products

There are several organizational, brand issues and customer support isssues with Citi’s approach. Citi’s customer may get confused, is this a Citi service? How can Citi’s current card customers leverage it? How do they leverage it? For example, it is hard for me to remember the 3 separate log ins that I have today with Citi today: Card, banking, Obopay… now I need a forth? Who do I call when I have a problem?

Globally, the only success model for aggregation and comparison that I am aware of is Egg.com, which Citi acquired May 2007 for just over $1B. If you sit down with Paul Gratton, Egg’s first CEO he will tell you that their success was driven by a complete focus on delivering value to the customer, both in product and online services. It is the coupling of product and service value that creates challenges for large companies to replicate, particularly with respect to cannibalization of existing products.

In the UK, customers select their bank savings account through leading comparison sites like www.moneysupermarket.com. In the US, customers select their bank based upon the proximity to their house. The business premise with Mint.com, Intuit and its competitors is that customers will start with budgeting, and then move to select financial products (no retention play as these are not necessarily Citi Customers) or transact. Egg was successful because is first started with the most competitive product, establishing trust, and then moved to deliver the best services to surround it.

Fortunately for banks, customers prefer to go to their bank directly to perform financial services. This “Trust Pattern” is something banks should want to reinforce. WFC exemplifies the alternate approach within its online banking services, with integrated budgeting tools, which is a great service and provides solid customer retention. Banks hold enormous control over the success of any aggregator’s site. Yodlee possesses no contractual right to the data, and the collection of customer information by any third party can be managed. If Mint, lowermybills.com or Microsoft/Citi start to gain traction with mainstream profitable customers.. expect banks to start charging Yodlee for access to their customer data, or eliminate it outright.

http://tomnoyes.wordpress.com/2009/09/15/intuit-mint/

Citi – Bank of the Future?

Even by Citi standards it is very strange to have 2 people with no retail bank experience driving a retail bank strategy. Liza came from the card group under David Simon in Customer Experience. Liza took over from one of Citi’s best internet leaders Rob Rosenblatt (now at Chase Cards).

September 2009

Travelocity CEO Michelle Peluso was hired by Teri Dial to run “Citi Forward”, with Liza Landsman running the mobile and internet team…

http://www.bloomberg.com/apps/news?pid=20601109&sid=alIEXQt0mqFQ

Citi has proven the ability to get deposits as Citi’s US Direct Bank under Direct CEO Steve Kietz was the fastest growing bank (not just online bank) in the history of the US, collecting over $8B in 6 months. Steve’s marketing genius was not enough to overcome the lack of investment. The fact remains that building a deposit book requires investment, (a 20 month payback at best). You either build a book or milk it.. (take a look at the balance run off in CitiDirect since the dropped the rate from 2.75%.. )
http://seekingalpha.com/article/18843-citigroup-q3-2006-earnings-call-transcript.

Issue for “bank of the future” is not collecting deposits.. it’s determining how you acquire and retain customers separate from a rate driven product play. The key “Strategy nut to crack” is how to build a profitable retail bank business in the US without branches. Chase, Wells and BAC have all done extensive studies that show customers select a bank based upon the proximity of the nearest branch to home/office.

Internationally, employee direct deposit (aka salary domiciliation) has been the most effective way to gain deposit customers with a minimal branch footprint.

Citi senior management continues to fuel the churn of executives here… lessons are learned and relearned in each new management appointment and each country. Understand that Michelle has very little appetite for the job…. perhaps she’ll gain perspective after her 4 month leave starts next month.

Quest for Consumer… Why Intuit is buying Mint for $170MM

Quest for Consumer Why Intuit is buying Mint for $170MM

For those of you that have never used Mint let me give you an overview (for more info see first link below). It is a free service used by 400k-600k users for personal finance. The core of its service is aggregation, where you register your financial (and non financial) accounts by providing your online credentials. Mint then logs in to your account and pulls your balance and transactional information into its online site (service provider is Yodlee). Mint leverages this information to provide services, such as:

Budgeting
Spending comparison (geographic and income ranges)
Alerts (against budget, transactions, balances, …etc)
Recommendations (ie marketing, saving, investing and budgeting)
Trending, ..etc

Mint.com will become part of Intuit’s Consumer Group, which includes both Quicken and TurboTax products. Intuit’s business case for acquisition rests on 3 tenants:

Grow consumer portal.. with Mint as the new base. The revenue equation here rests on expanded marketing of Financial services into combined Intuit.com/ Mint.com customer base.
Mint customers can be sold into TurboTax
New value added services such as: Card based bill payment (revenue from interchange), mobile, advisory, …

How should Banks respond?

There are 2 central issues for banks to consider: Customer data and customer relationship. Having your customers manage their finances outside of your financial institution is a lost opportunity to add value to your existing relationship. Banks need to decide what services and tools their customers WANT through customer engagement and advocacy. Mint’s demographic seems to indicate that there is a minimal business case for bank investment here. Banks may want to consider “good enough” services for budgeting such as what Wells Fargo provides online (https://www.wellsfargo.com/wfonline/spending).

If consumer surveys point to need for a comprehensive view and portfolio management the vendors such as Yodlee and Cashedge offer these services to banks today. Of specific focus should be small business and wealth. Banks should carefully track trends in these segment as needs are greater (as is customer profitability).

Banks have substantial control over Mint/Intuit success by controlling access to data. Many leading financial institutions have altered there hands off approach to allowing 3rd parties ad-hoc access to customer account information. Banks should require formal agreements with Intuit over data access, and shift costs to Intuit for managing the activities associated with allowing this access. During my time as head of Online and Payment services with Wachovia, over 40% of all ‘Internet’ help desk calls were related to Quicken/Money and a further 30% were related to aggregation. Banks should strategically manage access to their data from a cost, privacy and consumer perspective.

Financial Analysis.

$170MM is 5.5x invested capital of $31MM, and $408/Mint user. Revenue has not been disclosed, but it is assumed that Mint.com is operating at a loss.

2009 has seen other activity in this space, with Apax Partners $571MM acquisition of BankRate (NAS: RATE). Also look for new financial portals coming out in partnership with Microsoft within the next few months.

http://www.techcrunch.com/2009/02/19/quicken-online-cant-believe-mint-is-doing-so-well-sends-threatening-letter/

http://www.businessweek.com/technology/content/sep2009/tc20090914_208171.htm

http://www.businessweek.com/the_thread/techbeat/archives/2009/03/sxsw_mintcoms_d.html

http://www.reuters.com/article/pressRelease/idUS180130+22-Jul-2009+PRN20090722

From WSJ: The Top Sleepers

http://online.wsj.com/article/SB124146312592184275.html

Great Article.. had a good laugh.

Every time I go to France I marvel at the pace of life, whether in Paris, Lyon, Nice, or traveling in Bordeaux. 32 hour work weeks, minimum of 30 days of paid leave…late to bed, late to rise.. time spent eating 135 minutes PER DAY. How can you spend 2 hours EATING every day!? It’s no wonder that the French see American’s as always in a hurry… to talk, to eat, to walk, to work… Its also not surprising to see so few French emigres: as few want to leave, and fewer would want to hire…

But what are we in a hurry for? Seems like we spend 44% of our free time watching the tube… Sure would be great if we (Americans) could find something useful to do with our free time (community, social, educational).. then perhaps we could realize a quality of life advantage.

Thought for the day… is all time spent in bed by the French considered sleeping? Maybe we should have something to envy…

FIS to buy Metavante

http://pindebit.blogspot.com/2009/04/nyce-metavante-acquired-by-fidelity.html

http://www.digitaltransactions.net/newsstory.cfm?newsid=2130

http://www.americanbanker.com/btn_article.html?id=20090402BY4WW8EY

The payment space is hot. With FIS’s recent $2.94B acquisition of Metavante will create a company w/ combined revenue of over $5B. Good move by FIS. According to the deal summary, drivers were:

•Enhances growth prospects
•Generates substantial synergies
•Drives margin expansion
•Increases financial flexibility
•Accretive to cash earnings
•Creates significant shareholder value
Expect $260MM expense save in combined entity. FIS will be a key channel to deliver service to banks outside the top 20. External vendors should be ramping up there alliance plans w/ FIS.

Satisfying Customers

I was struck by a very good “top ten” list today in fast company. How do we improve customer satisfaction?

1.Eliminate the customer obstacle course. If you asked customers they’d say that the obstacle course for figuring out who to talk to and how and when to get service is over-complicated, conflicting and just plain out of whack

2.Stop customer hot potato. He who speaks to the customer first should “own” the customer. There’s nothing worse that sends a signal of disrespect faster than an impatient person on the other end of the line trying to pass a customer off to “someone who can better help you with your problem.” Yeah, right.

3.Give customers a choice. Do not bind your customer into the fake choice of letting them “opt out” of something. Let them know up front that they can decide to get emails, offers or whatever from you and give them the choice.

4.De-silo your website. Websites are often the cobbled together parts created separately by each company division. The terminology is different from area to area, as are the menu structures and logic for getting around the site. What’s accessible online is frequently inconsistent, as is the contact information provided.

5.Consolidate phone numbers. Even in this advanced age of telephony companies still have a labyrinth of numbers customers need to navigate to talk to someone. Get people together to skinny-down this list and then let customers know about it.

6.FIX (really) the top ten issues bugging customers. It’s likely you’ve been surveying your customers for years and know what’s broken. Do something about those issues! Then tell your customers!

7.Help the front line to LISTEN. Let your front line be human, give them the skills for listening and understanding and help the frontline deliver to the customer based on their needs.

8.Deliver what you promise. There is a growing case of corporate memory loss that annoys and aggravates customers every day as they have to strong-arm their way through the corporate maze just to get basic things accomplished. They’re exhausted from the wrestling match, they’re annoyed and they’re telling everyone they know. And, oh, by the way, when they get the chance they’re walking.

9.When you make a mistake – right the wrong. If you’ve got egg on your face, for whatever the reason, admit it. Then right the wrong. There’s nothing more grossly frustrating to customers than a company who does something wrong then is either clueless about what they did or won’t admit that they faltered.

10.Work to believe. Very little shreds of respect remain, if any, after you’ve put customers through the third degree many experience when they encounter a glitch in products and services and actually need to return a product, put in a claim or use the warranty service. As tempting as it is to debate customers to uphold a policy to the letter of the law, suspend the cynicism and work to believe your customers.

US lawmakers: Wal-Mart threatens US payment system

March 10 Reuters

Quote

In a highly critical letter to the acting chairman of the Federal Deposit Insurance Corp., obtained by Reuters, a group of more than 30 Congress members asked the bank regulator to reject Wal-Mart’s application to open a bank in Utah.

“Wal-Mart’s plan, to have its bank process hundreds of billions in transactions for its own stores, could threaten the stability of the nation’s payments system,” the lawmakers wrote.

“Given Wal-Mart’s massive scope and international dealings, it is not possible to rule out a financial crisis within the company that could damage the bank and severely disrupt the flow of payments throughout the financial system.”

The congressmen said the losses to the FDIC, which insures deposits at banks and thrift institutions, could be staggering if Wal-Mart begins to have financial troubles that bleed into its bank’s business.

“Consider the consequences if Enron or WorldCom had owned a bank,” the group said.

Good political spin, but wouldn’t it be better if top banks could articulate the threat a little more clearly? I had Denis Bouchard, WalMart’s Director of Payment Services up to Charlotte a few months ago. Needless to say, there is opportunity for improvement in relationships between “Banks” and WalMart. An example (WalMart POP Success): WalMart had a very successful pilot with POP (Point of Purchase Check electronification) but it’s continued rollout is hampered by new proposed fees (NREF) by NACHA that would greatly impact the cost effectiveness of POP.

Unfortunately most banks don’t know how to collaborate as single entities or as an industry. The real danger for banks here is public relations. Customer’s trust WalMart much more then do their banks, and see congressional involvement not as a mechanism to “protect” customers or the financial system, but as a control play. The retail lock box business is in jeapordy, and other retailers are closely watching WalMart’s moves here. During Denis’ visit, he said that Banks need to work actively to drive down the cost (to WalMart) of the payment system to 0 (ZERO). Strategies designed to “protect” and insulate existing (ex. ACH) payment systems will drive WalMart to other channels. From WalMart’s perspective, Banks’ profitability in retail payments will no longer be borne by retailers.

GE Consumer Finance has shown the ability to partner in consumer credit. There is ripe opportunity for someone to partner in payments… but is there anyone innovative enough to act?