SXSW: Banking 2.0: Financial Services Driven by People and Emerging Technologies

Live from SXSW in Austin, TX, Saturday March 13, 2010

Presenters collectively have more followers than the top 10 banks combined. People are coming together to invest better than the pros on Wall Street. Making products that are relevant to what people want. Transparency into what is going on with one’s finances, no more black boxes. Anytime, anywhere.

The paradigm has changed:

• Increased awareness of importance of savings
• Responsible borrowing/investing
• Frugal is the new smart
• Financial education starts earlier

New wave of financial products

• Stock picking communities
• Person-to-person lending, micro finance, crowd funding
• Community-based personal finance management: getting out of debt, better interest rates
• Credit score management
• Social savings

Presenters

• Bob Weinschenk, CEO SmartyPig: Set goals, share with others, they can contribute to your goals, and they’ll advocate with vendors on your behalf after you reach your goals. $42M > $353M in last year.
• Rob Garcia - LendingClub: Online financial community for people to invest in each other, borrow from each other.  Since 2007.
• Kenneth Lin, CEO CreditKarma: Access credit score anytime you want, learn how credit scores work, find savings opportunities (Credit cards, auto insurance, …)
• Aaron Forth at Mint (part of Intuit)
• Jennifer Openshaw, SuperFutures.org, free mobile coaching alerts to teens on their way to college

Do we even need banks today?

Yes, there is still a need for banks, they provide a back end that is very secure and safe. We’re just creating applications on top of this back end.

Difference from banks? Adding value to people’s lives, helping them to know what is going on with their money.

Trends with traditional financial institutions using social media: they see it as a trend, they have to do it because it’s happening.  They’re doing it for mitigation purposes, to be aware of and react to storms within social media.

We as consumers are smarter than to talk only to our bank for advice, because they’ll just point us to their own products.  By looking at Twitter and Facebook and other communications tools, you can get the intelligence of the community.

Easy to talk about social media, but running a company that is in the middle of social media - it’s a substantial thing to be in the middle of what your customers are saying, and it’s very humbling to see what customers really think.

What’s been the biggest surprise in building these businesses?

Lin: The virality of what we’re doing - 100k+ new members a month, this is very different from where we were 5-10 years ago.

Weinschenk: As forward thinking as we think we are, the last three top product features we did actually came from customers. We embrace the customer, bring them into the product planning process, makes us a better company.

Forth: The transparency that social media brings into the company - you’re either going to be customer-focused or not. Coming out at TechCrunch, it was very important for us to pay attention to customers, react to them. Put people - everyone in the company - into these channels. We use Get Satisfaction for customer support, and we love it.  We triage issues from Facebook and Twitter.

Garcia: We knew that transparency was very important for customers.  (They made their database available to people to download, and people found it very empowering).

What are the most powerful social media strategies?

Lin: You have to be reactive. If you have a strict gameplan, it doesn’t work in this environment. Place a few bets in a few different areas, be prepared to react to what customers respond to, place your engineering resources towards that. We all have great ideas of what our company will be when we start, but rarely do we get to what our vision was - you usually end up somewhere else.

Garcia: Incorporate the members of our platform into what is happening in the company. For banking, due to regulations, very closed environment - once you put your money into a CD, you don’t know what they’re doing with the money. We’re keeping people engaged with what’s happening in the company - here’s who we’re talking to (lenders) today, here’s what’s happening today.

Weinschenk: Our customer isn’t just GenX and GenY, home improvement is a goal category, and we get 46-year old females.  We’ve tried to make it so that however people want to reach us, it’s ok: tweet, email, phone call. You have to open up in your audience’s language. Twitter is wonderful but it’s not for everybody, email is great, but it’s not for everybody.

Forth: Common Tweet is “can’t believe I’ve blown my alcohol budget, and it’s only the 12th of the month”. People are having insights about themselves, want to share that. Personal finance is not an inherently social thing, so it’s an interesting thing, we didn’t build a Facebook app when everyone else was, because we couldn’t figure out how to make finance social. But if you add value, people want to talk about it, they want to share, that’s a great way not to spend marketing dollars. Personal finance is a confusing and frustrating topic for many, and there’s lots of jargon and technology, so we’ve done a blog and it’s purpose is to take complicated subject matter and make it digestible. Our blog has been a great way to help Mint and make people relate to Mint without first signing up for it.  Blog has been great for brand-building.

What new trends do you see coming on the horizon?

Lin: Inherently banks are relatively inefficient, we still get direct mail for credit card offergs. Banks don’t proactively call us and say “your rate will be lowered because you’ve done a good job managing your credit”, so there’s no transparency. How do we get over the friction points? We don’t go through the hassle even though we know we’ll save $100 a month.

Weinschenk: When was the last time your bank or credit card company has helped you with your spending?  I’ve had the same bank for 20 years, but they give me the same promotion for flowers every month, they know what we do, but don’t target accordingly. We’re releasing a service to offer value on spending from the mobile device - allow you to negotiate through the network to get better pricing  That’s the mobile app that really starts to open things up.  If you can save 2, 3, 10% on your purchase, that dwarfs the 2% you’re getting at your bank.  You get instant negotiation.

Garcia: Disintermediation is the key.  Banks have taken money at 2-3% and would lend it out at 20%.  We’re disintermediating this.

Forth: Transparency and insight is a big part, having visibility into your true financial situation, that’s step 1. The second thing is being a true advocate across financial institutions.  It can be difficult to interpret what a bank is telling you, knowing about interest rate changes etc. Third is helping people save money.

Discussion

10 years ago people don’t know what a credit score was, now people know what it is, we want to make it so that people can manipulate their scores for the better.

Q: Are you profitable?

A: Lin: not yet. Garcia: Yes. Forth: if you’re an advertiser, a large bank, you’ re looking for customers - people who are interested in their finances - because they’re a lower credit risk.

Q: Much talk last year about the ROI of social media, but that didn’t come up in this panel. Much investment in social media, videos, etc. How do you measure ROI? Or do you lump all of this into R&D because it’s part of your model?

A: Forth: We’re fairly quantitative internally, so we like to know return. There’s an aspect of brand that this falls into as well. We have a philosophy of carving out a position for the company, we have something to say, and that’s our way to say it.