{"id":109,"date":"2009-03-02T19:00:16","date_gmt":"2009-03-02T13:30:16","guid":{"rendered":"http:\/\/sketharaman.com\/blog\/?p=109"},"modified":"2009-09-25T01:43:32","modified_gmt":"2009-09-24T15:43:32","slug":"personal-finance-services-walk-the-tightrope-between-convenience-and-security","status":"publish","type":"post","link":"https:\/\/sketharaman.com\/blog\/2009\/03\/02\/personal-finance-services-walk-the-tightrope-between-convenience-and-security\/","title":{"rendered":"P2FM Services Walk The Tightrope Between Convenience and Security"},"content":{"rendered":"

The latest breed\u00a0of American personal finance services like Mint<\/a><\/strong> and Wesabe<\/a><\/strong> provide great value by helping their users get a handle on their personal finances. Mint bills itself as an online personal finance service that securely downloads users’ financial transactions, categorizes their transactions, provides a unified view of all account activity and associated \u00a0account alerts, and offers personalized suggestions for significant savings opportunities.<\/p>\n

Like traditional PFMs, Mint and others \u00a0provide generic news and advice related to personal finance \u00a0areas like income tax, interest rates, and so on. \u00a0But, by analyzing their users’ individual financial transactions, Mint and others are able to bolster their value proposition by making suggestions that are personalized for each individual. For example, Mint would be able to tell one user, “Hey Jack, you can earn $100 more by moving your $6,000 from your Bank of America account *6666 to ICICI Premium Savers Account”, and prod another one, \u00a0“Hi Jane, did you know that you can save $75 by moving your automobile insurance from XXX to YYY \u00a0insurer?” As a result, they are customized or individualized personal finance managers, somewhat like the financial advisors that high networth individuals employ. For \u00a0this reason, I’ll \u00a0use the term \u00a0‘Personalized Personal Finance Manager’ or \u00a0‘P2FM’ while referring to Mint, Wesable and other modern personal finance services.\u00a0\u00a0\u00a0<\/p>\n

Welcome companions even in the best of times, P2FMs deliver\u00a0more value now — what’s not to want about the chance to get every tip to earn more and spend less during these challenging economic times? No wonder P2FMs\u00a0are seeing explosive growth in recent times with Mint alone claiming that it\u2019s adding over 3,000 users every day, tracking $50 billion in transactions and $15 billion in assets and has identified more than $100 million in potential savings for its users.<\/p>\n

Eager to experience P2FMs\u00a0firsthand, I recently registered myself on Mint. At the outset, I was impressed by the anonymity Mint affords you by not asking you for your name or address. All it needs is your email address. Along the way, I learned that Mint would be\u00a0able to deliver personalized suggestions relevant to me by\u00a0analyzing transaction statements of\u00a0my financial accounts without any efforts from my side. Wow, won’t that be very convenient, I said to myself.<\/p>\n

To do all this, Mint required me to\u00a0‘link’ my financial accounts with its website. This meant sharing with Mint all the confidential information (like password, date of birth, and\u00a0answers to secret questions) that I’d use\u00a0to access any of my Internet Banking accounts.\u00a0In other words, I’d be allowing Mint to get into my\u00a0Internet Banking account on my behalf.\u00a0<\/p>\n

This stopped me right in my tracks and I realized right there that P2FMs are walking a severe tightrope between convenience and security.<\/p>\n

Even assuming I trusted Mint\u2019s integrity and believed that it would \/ could\u00a0never make improper\u00a0use of my financial account credentials, I wasn’t so sure that a startup company would be able to protect my confidential information when large banks and credit card processors seem to be losing millions of customer records to hackers at regular intervals despite all their investments in security technologies. I also remembered the constant entreaties from banks never to reveal passwords\u00a0to to anyone. So, I refused to link any of my financial accounts with Mint.<\/p>\n

In the next two weeks, I received a couple of reminder emails from Mint asking me to link my accounts. I\u00a0replied back to them sharing my security concerns. I haven’t heard back from them and assumed that they must be experiencing the same behavior from most of their registered users.<\/p>\n

Lo and behold, that’s not the case.<\/p>\n

According to data\u00a0Mint presented recently in\u00a0its response to Intuit\u2019s challenge<\/a><\/strong> of its claimed user numbers, Mint mentioned that 30% of its\u00a0934,000 registered users\u00a0(all in the US) haven\u2019t linked any of their financial accounts to Mint (like me!). That meant\u00a0that 70%, or 655K users,\u00a0have linked at least one financial account to Mint (unlike me!). In fact, Mint claims that most of its users link between 5-6 of their financial accounts.<\/p>\n

It seems\u00a0that the value of personalized suggestions and the convenience with which it delivers them have allowed Mint to\u00a0overshadow\u00a0users’ security concerns.<\/p>\n

Now, if P2FM\u00a0services have seen explosive growth in the US, much of which has happened during the last six months of challenging economic times, we should be finding a similar trend in Europe, which is going through equally challenging times and has comparable Internet penetration as the US?<\/p>\n

No! You\u2019d be hard pressed to find any well-known personalized personal finance services in Europe. Why?<\/p>\n

By automatically accessing their users\u2019 financial accounts regularly (once every night, in the case of Mint), P2FMs may deliver great convenience to their users instead of asking their users to go through the inconvenience of downloading and submitting transaction statements frequently. But, in return for this convenience, users have to keep their security concerns aside and give away confidential information to P2FMs.\u00a0Going by conventional wisdom about\u00a0Europe’s security-consciousness, it’s no wonder that there are no well-known P2FMs in Europe.<\/p>\n

To succeed in Europe and\u00a0in many other countries in\u00a0the world, P2FMs will have to tweak their model to recognize that\u00a0not everyone\u00a0will compromise on security for the sake of convenience. They’ll have to think of innovative ways to allay\u00a0users’ security concerns, yet maintain middle-ground on convenience. The only P2FM I came across in Europe shows some progress in that direction.<\/p>\n

Kublax<\/a><\/strong>, a barely known\u00a0P2FM\u00a0in the United Kingdom, does not force users to enter financial account credentials if they choose not to, so it’s secure. It analyzes transaction statements that are published on its website by users who visit their financial accounts themselves to download transaction statements. Although its website contains step-by-step instructions on how to download transaction statements from the Internet Banking websites of leading banks in the UK, I found this to be a somewhat cumbersome procedure. Then, when I realized that I have to repeat this procedure\u00a0periodically (Mint does this once a day) so that that\u00a0Kublax\u2019s alerts and suggestions are current and relevant, I decided it was not worth taking so much\u00a0trouble just to save some\u00a0100-200 bucks — which is the maximum savings that I reckon P2FMs can deliver per user on an average going by\u00a0Mint’s claim of $100M in savings suggestions (for its 655K users).\u00a0<\/p>\n

So, P2FMs have a long way to go to achieve\u00a0the middle-ground on convenience.\u00a0\u00a0<\/p>\n

One concluding thought: If 655K\u00a0users in the US didn\u2019t mind sharing their financial account passwords with a startup like Mint, I’m sure a much greater number won’t mind doing so with their trusted banks. This should be the tipping point for banks to start offering\u00a0personal finance solutions on their Internet Banking portals especially when seen in the context of the large user count amassed by early\u00a0banking-sector PFM providers like Bank of America (2.5 million)\u00a0and Wells Fargo (1 million).<\/p>\n","protected":false},"excerpt":{"rendered":"

The latest breed\u00a0of American personal finance services like Mint and Wesabe provide great value by helping their users get a handle on their personal finances. Mint bills itself as an…<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-109","post","type-post","status-publish","format-standard","hentry","category-uncategorized"],"_links":{"self":[{"href":"https:\/\/sketharaman.com\/blog\/wp-json\/wp\/v2\/posts\/109","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/sketharaman.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/sketharaman.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/sketharaman.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/sketharaman.com\/blog\/wp-json\/wp\/v2\/comments?post=109"}],"version-history":[{"count":0,"href":"https:\/\/sketharaman.com\/blog\/wp-json\/wp\/v2\/posts\/109\/revisions"}],"wp:attachment":[{"href":"https:\/\/sketharaman.com\/blog\/wp-json\/wp\/v2\/media?parent=109"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/sketharaman.com\/blog\/wp-json\/wp\/v2\/categories?post=109"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/sketharaman.com\/blog\/wp-json\/wp\/v2\/tags?post=109"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}