Seller Side Auctions Gaining Traction: Part-1

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Around the end of last year, I’d written a post about MoneyAisle, the pioneering provider of the novel realtime seller-side auctions for savings products. Its rapid growth over the past year – $1.65 billion worth of auctions and $100 million worth of certificates of deposit and high-yield savings deposits – suggests two things. One, in a sputtering economy, Americans increasingly turned to relatively safe savings instruments like CDs and high-yield savings deposits to park their surplus funds. Two, they found it convenient to shop for these instruments through a frictionless buying process pioneered by MoneyAisle.

This trend seems to be catching on in Europe as well, going by a spate of MoneyAisle-like websites launched during the last twelve months there – MaxBips in the UK, Spaarbod in The Netherlands and Licuro in the UK, Sweden, Luxembourg, Belgium, The Netherlands and Germany.

For a quick recap of the seller-side auction model pioneered by MoneyAisle: Buyers of savings products simply keep their wallets ready; banks offering such products slug it out in a realtime auction amongst themselves to win the business. Beneath the surface, this might not seem very different from online price discovery models that are commonplace among air tickets, hotel rooms, car rentals, and other perishable product categories. In my previous post, I’d commented that, even so, this model offered a vastly superior customer experience in financial services and had predicted that it could spread beyond bank CDs and high-yield savings deposits to cover credit cards and other products and services compared routinely on MoneySupermarket, Filife, Bankaholic and other conventional comparison sites using relatively stale static data.

Seems like my prediction has started coming true!

TransFS has just launched a realtime auction website for procurement of credit card processing services. On its website, TransFS (Transparent Financial Services) claims that small businesses can save 40% on average on their credit card processing costs by using its unique auction process and comparison engine.

TransFS has also announced that it will be soon launching realtime auctions for Property & Casualty Insurance, Health Insurance, Business Credit and Payroll Processing.

It would be interesting to watch the go to market strategy and adoption rate of TransFS. Unlike MoneyAisle and the crop of websites in Europe who cater to the consumer, TransFS targets the small business market. As against more than 8,000 banks offering savings products, there are only fewer than 200 837 (source: TransFS Credit Card Processing Directory) credit card processors in the United States. In other words, the number of demand and supply side players is very limited in the case of credit card processing and other services served by TransFS, compared to those offered by MoneyAisle. As a result, it might be a big challenge for TransFS to sign up small businesses to its platform when they could simply continue their current practice of getting quotes directly from credit card processors (and health insurers or payroll processors, as the case may be).

PS: In Part-2 of this post, I’ll bring you more details of the rationale behind the founding of TransFS and the results of a live auction I ran recently on it. By that time, I should’ve ironed out a few technical issues and be able to publish MoneyAisle’s live interest rate ticker. Stay tuned…

Seller-Side Auctions for eBay-Weary Buyers

This entry was posted on Saturday, October 3rd, 2009 at 2:18 AM and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

http://transfs.com Eric Olson

Hi Ketharaman,

Thank you so much for the coverage. We are excited about the opportunity to revolutionize the procurement of credit card processing services.

I wanted to follow up on the market size numbers you mentioned. There are actually more than 800 ISOs (independent sales organizations) that sell credit card processing services in the U.S. so the market on that side of the marketplace is about 4x the number you mentioned in the post. The large number of ISOs is one the issues we solve with our marketplace. As a small or medium size business owner it can be daunting to find and compare credit card processors. TransFS does all the work for the business owner saving him or her time and money.

Also, we can address small and medium size businesses. We have helped a number of businesses that earn between $1 – $3mm a month or more in revenues save a lot of money. The addressable market of small and medium size companies is also very large (in the low 10s of millions), which is contrary to why you say in your post.

I would love to continue this dialog with you so please email me if you are interesed. Thanks again for the mention!

Cheers,
Eric Olson
Co-founder & COO: TransFS.com
eric@transfs.com
http://www.gtm360.com Ketharaman Swaminathan

Hi Eric:

Thank you for your feedback. TransFS’s addressable market size is indeed impressive. From the results of a sample auction, I can readily agree with you that TransFS can deliver significant savings once it signs up a business. Instant gratification, clout and leverage, time and effort, FDIC-equivalent certification — these could determine the go to market strategy toward signing up businesses. I’ll email you soon with my thoughts.

S. Ketharaman