Right now, many people in the banking industry are trying to figure out how to get you to talk to them online. The benefits to financial institutions are pretty obvious. Online interaction helps them build brand awareness and loyalty among consumers. It saves them money because fewer people go to physical banks and talk to human beings, who require paychecks. It helps them “leverage” (bankers love this word!) data about our purchases and our social media interactions to send us offers for products they think we’ll like and buy.
In short, bankers think the Internet will eventually make them lots of money. But what’s in it for us?
A lot of startups at this week’s Finovate conference in New York tried to answer that question. There’s a whole mini-industry aimed at getting consumers to engage with financial institutions online, usually by encouraging people to use Internet-based financial management tools.
Since there are so many different companies, and since they all look so different from the consumer’s perspective, we thought it would be interesting to gather a bunch of them together and look at the different paths they take toward the goal of engaging people about financial management and education. All of these companies presented Wednesday at Finovate, where most of them hoped to meet future funders and business partners.
This is a website geared to women “ages 20 to 60,” Alexa von Tobel, its founder, told me at Finovate. It’s one of the more polished sites that presented, offering an array of useful tools. The first is called “My Money,” which lets users put all their assets and debts into one place, and track how they’re doing over time. Next there’s a “Bootcamp,” which offers short email-based tutorials on ways to cut costs and get our of debt, as well as longer courses on how to manage finances.
All of that is offered free. One way LearnVest makes money is by upselling some members into its “Ask An Expert” program, where people can have one-on-one email chats with financial experts about ways to make and stick to a financial plan. Right now the service costs $5 for a one-day membership, $40 for three months and $130 for a year.
“The average financial planner costs $250 an hour, and people have to find a planner they trust,” von Tobel says. “So we offer that service at a fraction of the normal cost to make it available to more women.”
Bill Dwight, founder of FamZoo, was one of our favorite people at Finovate, and it wasn’t just because he wore jeans and a T-shirt to a roomful of dark-suited bankers. It’s because he forced bankers to consider what he views as incontrovertible truth, in this case about the online games that a lot of banks offer on their sites to lure kids.
His truth: Most of those games suck.
Dwight started his presentation with a clip from one such game called “Savings Quest,” offered by Wells Fargo. It’s about the most boring thing ever placed on the Internet. Next Dwight switched to a scene from World of Warcraft, in which a monster rips out another monster’s brain in the middle of a lightning storm.
Dwight’s message: Leave the video games to the experts.
“Let’s be honest. How many of you can imagine your kids playing this game more than once?” he asked about the Wells Fargo game. “I have five kids, and they all want to play Call of Duty. You can’t compete with that.”
Instead of online games, FamZoo offers families a virtual savings bank. Kids get to track how much money they earn from allowance and chores, and record the things they buy. It gives them a chance to divide their savings into amounts dedicated to short-term spending, long-term saving, and charitable giving. It has tools that show how much kids will make over time from different kinds of investments (giving them a hands-on view of how compound interest works), and tracks their payments after they borrow from the “Bank of Mom and Dad” for things like computers and iPads.
“To the kids, it’s real. It’s like signing into an account at Wells Fargo,” Dwight says. “It also helps make it more real to the parents. The biggest reason why systems like chores and allowances fail is because of the parents letting it go, not the kids.”
Right now, Dwight has about 2,000 families paying $30 a year for the service. That’s really small. Dwight came to Finovate to try and lure banks into using FamZoo instead of more lame-o video games to reach out to young consumers.
“My son Quentin is nine. He’s learning to save and spend responsibly, and in a few years he’ll get his own savings and checking accounts,” Dwight told the bankers. “Wouldn’t you as a financial institution like to be right there as he does?”
The “Zero” in this company’s name refers to zero debt. The idea is to use pictures to show people how long it will take them to pay off their debt. If they make an extra payment, or slack off and pay only the minimum, the pictures and graphs change to show how much closer or farther away the day becomes when they can finally declare themselves debt-free.
Making debt literal seems to make it easier to manage, says Rod Ebrahimi, founder and CEO of ReadyforZero.
“Our users are paying off their debts two times faster than the average consumer,” Ebrahimi says.
Like LearnVest, ReadyforZero helps people to place all their income, assets and debts in one place, and see them in relation to one another. Once people enter their debt and income data, the site uses algorithms to make helpful suggestions. It reminds them to make all their various payments on time. If someone receives an extra $400 on their paycheck, the site can detect that, and show how much faster they can pay down their credit cards if they apply even some fraction of that windfall to their debts.
“It’s not like people are taking all this money and then saying ‘Peace out!'” says Ebrahimi. “People are motivated to pay off their debts. We help them change their behavior so they can do that faster.”
Most financial planning websites treat life as a constant, steady thing. They operate on the assumption that we will keep living in the same house, owning the same car, and making the same income for years at a time.
But as we know, that assumption isn’t true anymore. Most people don’t keep a job for 30 years, and more people than ever are freelancing. So Planwise is a financial planning site that is geared towards plotting change, not consistency.
“It enables people to truly understand how their decisions today affect their lives tomorrow,” Vincent Turner, CEO of Planwise, said at the conference.
The site goes public later this month. Consumers enter in their data as it stands right now. On each screen, they are offered the opportunity to make different hypothetical decisions—whether to buy a car or a house, or to return to school, for example. Other options let them plan for a possible drop or boost in income.
The site takes that information and shows the long-term effects of short-term changes. How many thousands more will you pay in interest over the next ten years if you buy a Cadillac instead of a Kia? If you plan to switch from full-time work to part-time freelancing, how much more money will you have to make to compensate for changes in your taxes?
“You can get all your finances in and start toggling with them, so you can see how changes now will affect you later,” says Ryan Paradez, product manager for the company.