Personal finance 2.0

Screenshot from Mint

TEXT OF INTERVIEW

Tess Vigeland: Call it "Facebook Finance." Some of the young 'uns out there -- I guess I'm not one of them anymore -- now use a single Web site to track credit card statements, bills, and online bank accounts.

But there's more! You can chat with other users about financial goals... as well as the rad new indie band -- do they still say "rad" these days?

Venture capitalists have been busy investing millions of dollars in personal finance sites like Spendview, Buxfer, Mint, and Wesabe.

For details we're joined by Emmett Higdon of Forrester Research.


Tess Vigeland: Welcome.

Emmett Higdon: Thank you so much for having me.

Vigeland: Tell me a little bit about these sites. What makes them different from, say, sites that we've known before where you can have your bank account, your credit card accounts there, all together for you?

Higdon: From a perspective of what you can do with these sites, relatively little difference actually. The difference largely has been the difference in the user base. It's the Gen-Y, it's the MySpace generation, if you will, who is frequenting these sites. We've seen many of them crop up, really just in the last 12 months or so.

Vigeland: I think this is fairly unusual actually for young people to be paying attention to their finances?

Higdon: It sure is and what attracts them to these sites initially is these similar kinds of features that you see on the social networking sites like Facebook or MySpace.

Vigeland: So what, like you can chat with other users about why you're in $50,000 of credit card debt?

Higdon: Absolutely. Many of these users know very little about personal finance or what to do about the debts that they've accumulated and these sites are starting to help them figure that out by showing them what others in similar situations have done to get out of the debt that they're in.

Vigeland: Well, have you looked at the sites and is the advice that is given to those questions valid?

Higdon: Well, I often joke that you get what you pay for when it comes to these sites...

Vigeland: And these sites are free, right?

Higdon: These sites are all free, exactly. The advice largely comes from the other users on these sites, so there is no professional advice being dispensed by the folks who run the sites themselves. In large measure, the advice that users are getting is coming from their peers or coming from the other users. So in many cases, that's very good. If someone has had a lot of college debt, for example, and knows what they can do to solve that problem, that can be very good advice. The other piece that folks are coming to this site for are tools, simple tools to help them set up a budget, manage their money and in many cases, simply learn where is that money going.

Vigeland: So how exactly do those work? Is it like a Quicken online?

Higdon: It's very similar to what a lot of the banks have done with the firms that we call the aggregation firms. These are the Yodlee.coms of the world who provide those links into all of your different companies. This is what gives your bank the ability to say "come to our site, give us all of the names of the other companies you deal with and we'll give you a single page that lists all of your accounts all in one place, whether that's your credit card account or your bank account or even in some of your other bills. They'll put them all on one page for you. So, these sites are very similar in that they will aggregate all of your other bills, all of your other bank accounts in one place.

Vigeland: But all of that information is there for a hacker to go in and get it all in one fell swoop.

Higdon: It absolutely is and certainly it's something that the banks wrestle with all of the time in terms of the security around their online banking sites. Taking Yodlee as an example, Yodlee has been around, has been working with the banks for many, many years to offer this functionality where you can see all of your accounts in one place and they've done a very good job of assuring users and giving them a comfort level that "hey, your passwords, your IDs are going to be safe." With these new sites that have come online, the Mints, the Buxfers, the expensrs of the world, how comfortable will these users be with giving up their credentials to a third-party Web site that just popped up last month. It is safe, it is secure; the real question is will all of these other sites that you're going to and giving your credentials to, where will they be in three months, in six months time?

Vigeland: Do you or would you use any of these services?

Higdon: I plan to, absolutely, for one very good reason: the major banks, unfortunately, have been very slow to pick up on this functionality and I think that this is really a wake-up call for them. These sites, if you take the top six or seven sites, they've got about 400,000 users in total going to these sites today. That's a lot of customers.

Vigeland: Emmett Higdon is a senior analyst at Forrester Research. Thanks for your time.

Higdon: Thank you so much.

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