the mozo blog

While attending the Finovate conference in the US recently one thing was clear – the face of online banking is changing. And when I say the face, I am talking about just that, the face of it to users.

There are some exciting new applications in the online banking space in the US, in the form of internet banking platforms that are designed to go beyond the transactional nature which it is today, and move into the realms of helping consumers with their finances in a broader sense. Rather than the generic “one size fits all” approach, they are offering users genuine personalisation of their online banking experience to meet their needs.

Leading the way is Jwaala who market their product as BOB (”Better Online Banking”). And unlike every second coffee shop in Sydney claiming they have the best coffee in the city, I think Jwaala can sit safely behind their call, because it IS better. It offers several tools which help users manage their personal finances, do budgets, integrate their accounts from other institutions, and get personalised reports and alerts. And it is all highly customisable as the user wishes. It’s all a long way ahead of the current offering in Australia.

Another more recent player (only launched in January 2009) is iThryv who are doing some great things with a genuinely consumer friendly interface, and highly targeted content. Beyond just transactional information, they deliver highly targeted content to the user, in a form the user chooses. For example they have developed an interface designed for and focused on kids aged 5 to 11. It’s a long leap forward from the CBA Dollarmite account!

Given that ANZ was the only Australian financial institution at the Finovate conference, I think we can expect ANZ to lead the way in Australia with some innovative new customer focused online banking tools in the months ahead, either partnered with one of these companies or taking their ideas and developing them on their own. Hopefully personalisation of the online banking experience in Australia is not far away.

In the US, a lot!! Because for reasons I will not even try to understand, the US Senate has just passed a bill that cracks down on credit card fees , with an attached measure that would allow guns in national parks. What the…..?

Like me you likely have at least one eyebrow raised right now.

Though at least the attempt to attach an immigration provision to the same bill, that would have banned credit cards from going to anyone who isn’t an American citizen, failed. Phew, at least some dose of reality.

So apart from the sheer absurdity of connecting guns in national parks to credit cards, this is a very significant change which will have a major impact on the US credit card industry. And of course what happens in the US often trickles down under eventually, so let’s take a closer look.

Essentially the changes, headed to Obama’s desk for signing today, will:

• ban interest rate hikes on existing balances
• dictate that 45 days notice must be given for significant interest rate, fee and finance change increases
• enforce the ‘good’ type of payment allocation (thereby stopping one of the banks’ sneakiest practices of all, where they apply money paid back to the lowest rate first, such as a balance transfer rate, and leave the high interest rate purchases or cash advances accruing)
• cease the practice of automatically taking a card over the credit limit and then applying a fee without warning.
• limit the number of cards and the amount of credit limits for people under 21

What an incredible victory for the consumer!!

Of course the US banks have tried every argument they can think of to stop this going ahead, and are essentially now threatening that interest rates and fees will have to go up for everyone. But those who respond by doing that will see consumers vote with their feet.

Happy days for US consumers.

I wonder if Canberra is watching?

I’ve just come back from showcasing mozo.com.au at the Finovate conference in San Francisco, which bills itself as “the visionaries creating new ways to bank, manage personal finance, and appeal to financial consumers”.

Being a US focused conference (Mozo was the only Australian site presenting), it was a chance to see the latest and greatest in finance based innovation to come out of the US.

My first observation is that the level of innovation in the US, in the internet based finance space at least, is a long long way ahead of Australia. The level of product proposition and sophisitication is simply much higher than we have.

BUT, and for me it is a very big but…

In many cases there were no clear business models associated with the innovations.

I saw presentation after presentation (companies gave a 7 minute demo of their site) with nifty functionality and tools, but for most of the 7 minutes I looked for, and failed to find, the associated business model. It was simply unclear to me how many of these companies intend to make money.

So it got me pondering the question – can innovation come before business model? Is it a valid strategy to develop a product or application, without thinking through the business model up front?

On the whole, the US seems to think so. Because many of these ‘no revenue in sight’ companies have been exceptionally well funded, some of them in excess of US$10m before seeing any revenue. And that’s for an internet business, which is by it’s nature low cost to set up. That’s a lot of money to invest in an unknown business model! In fact in their list of “highlights” many companies were listing the money raised as an “achievement”, with a sense that the more the better. Big teams, fancy offices, all before starting to code the website. On the whole the US seems to operate on the principle of raise the money first, start the business second.

I think it’s fair to say that on the whole Australia operates the opposite way around. For a start, we tend to guard our financials very closely to our chest. We also tend to startup our businesses differently, by first trying to get the business going for as low a cost as possible, prove up the business model, and only then seek greater capital to expand. We have small teams and very basic offices, often working from home for the early stages. We tend to take the view that the less we spend on getting things started the better. Quite the opposite path.

I have to say that I struggle with the concept that innovation can come before business model. So for me the answer is no, you shouldn’t develop an application without a clear view of how you’ll get back your investment in it. It doesn’t need to be immediately obvious to everyone else, and to be fair many of these early stage companies may have longer term views of their revenue models which are not yet apparent, but to leap and hope doesn’t cut it for me.

Of course people will counter this view with examples of companies which developed a product first and successfully went on to later work out how to make money. But these are the exceptions, and for each of these there are many many more failures. Which is why I struggle with it being a starting point of how to go about things.

So I predict that while the list of new ideas from Finovate may deliver one or two big successes, I fear that for many trying to log in to their websites in five years will deliver a “site not found” message.

Of course there were also some standout companies at Finovate that had BOTH great innovation AND a clear business model. I’d tell you which ones, but then I’d much rather keep that to myself and rollout those ideas for mozo.com.au instead!!