Lendingclub.com, Caura.ru, Prosper.com, zopa.co.uk, Qiwi

Emerging Financial Innovators to Watch: An Analysis of Finovate Startup09 May 2009

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Personal Financial Management .......................................................................................................................... 4

iThryv ....................................................................................................................................................... 4

Jwaala ..................................................................................................................................................... 5

Mint .......................................................................................................................................................... 6

Rudder ..................................................................................................................................................... 7

Strands .................................................................................................................................................... 8

Wesabe ................................................................................................................................................... 9

Payments............................................................................................................................................................ 10

Acculynk ................................................................................................................................................ 10

HomeATM ............................................................................................................................................. 11

MoBank ................................................................................................................................................. 12

Moneta .................................................................................................................................................. 13

SeerGate ............................................................................................................................................... 14

P2P Lending ....................................................................................................................................................... 15

Prosper (voted Best of Show) ............................................................................................................... 15

Lending Club ......................................................................................................................................... 15

Pertuity Direct ........................................................................................................................................ 15

Financial Tools ................................................................................................................................................... 18

BillShrink (voted Best of Show) ............................................................................................................. 18

Centrro (KnowBeforeYouApply.com) .................................................................................................... 19

Credit Karma ......................................................................................................................................... 20

Expensify ............................................................................................................................................... 21

Kapitall ................................................................................................................................................... 22

SimpliFi (voted Best of Show) ............................................................................................................... 23

Security ............................................................................................................................................................... 24

Silver Tail Systems (voted Best of Show) ............................................................................................. 24

Marketing Tools .................................................................................................................................................. 25

Micronotes ............................................................................................................................................. 25

Related Research ............................................................................................................................................... 26

T a b l e o f C o n t e n t s


Audience: Financial institutions, bank technology vendors, angel investors, product managers, product innovators

Authors: Mark Schwanhausser, Research Analyst, Multichannel Financial Services Alan M. Ruperto, Associate Analyst Contributors: Mary Monahan, Managing Partner and Research Director Bruce Cundiff, Director of Payments Research and Consulting Editor: Levi Sumagaysay Publication Date: May 2009

Overview Few conferences compare with Finovate Startup09 in San Francisco, a conference that provides a glimpse of the future of financial services as seen through an eclectic roundup of nearly 60 startups. Given only seven minutes before the microphone is cut off, 36 presenters – including nine exhibitors voted to the stage by attendees – had scant time to wow the crowd of bankers, investors, analysts and the press and win their votes for best of show on April 28. As varied as the startups are, the product themes of this year’s lineup can be summed up in four words: transparency, empowerment, aggregation and simplicity. Time after time, this consumer-centric collection of companies was focused on providing consumers the tools they need to manage, monitor and move money on their own terms.

Primary Questions • What are the emerging products and trends to watch for in personal finance management (PFM), payments,

financial tools, security, and online marketing? • What sets of features or functionality are consumers looking for? • How could these startups affect financial institutions or shape the industry’s thinking? • How likely are these startups to succeed? • What obstacles stand in their way?

Key Findings At day’s end, attendees voted four companies the best in show: BillShrink, Prosper, SimpliFi and Silver Tail. After taking a closer look at 22 startups, our analysis includes:

√ An exploration of personal finance management (PFM) tools, with more commonplace names such as Mint and Wesabe joined by wannabes such as Jwaala, Rudder, Strands and iThryv – all driving home that PFM is a non-starter if it can’t be simple, engaging and practical.

√ Five startups that seek – but face significant obstacles – to transform how consumers pay for goods online or via mobile (Acculynk, HomeATM, Mobank, Moneta and SeerGate).

√ A troika of peer-to-peer lending and investment sites that take markedly different approaches to the emerging P2P marketplace (Prosper, Lending Club and Pertuity).

√ A gaggle of startups with intriguing but limited financial tools designed to help consumers cope with credit scores, lending hassles, expense reports, financial planning and more (BillShrink, Centrro, Credit Karma, Expensify, Kapitall and SimpliFi).

√ A security company that devised click-stream analytics to detect man-in-middle and other attacks (Silver Tail).

√ And a company that claims tailored marketing during bill-pay can inject life and revenues into online banking (Micronotes).


Personal Financial Management

iThryv

www.ithryv.com Founded: 2007

VC backing: N/A

Employees: N/A

Headquarters: Oklahoma City, OK

Launched in January 2009 and demonstrated at Finovate 2009, the iThryv platform provides a flexible second-

generation online-banking system aimed at offering customers a new money management tool with varying “flavors”

catering to specifically targeted segments. The platform also contains built-in content delivery for financial education, a

frequent-user incentive system, a savings “score,” and a widget-based delivery model. It allows customers to fully

personalize their online-banking experience by selecting their own themes or even uploading their own photographs.

The application widgets are interchangeable, with each serving a different banking function. IThryv’s first three “flavors”

target younger consumers: ages 5 to 11, 12 to 17, and 18 to 24.

IThryv product highlights include:

• Unique online-banking personalization using interchangeable application widgets, themes, and pictures. • Partnership with banking bill-pay vendor iPay.

Javelin Point: The partnership with banking vendor iPay could give iThryv an inroad to mid-tier banks and credit

unions looking to differentiate their online banking and appeal to the varying segments within their customer base.

Financial institutions could construct several “models” to market to different demographics such as baby

boomers, Hispanics and married couples.


Jwaala

www.jwaala.com Founded: November 2006 VC backing: None Employees: Declined to state Headquarters: Austin, TX

Many of the products spotlighted at Finovate fall into the category of “bolt-on” products. They’re nice improvements –

potentially even the best thing going – but they pose a challenge for banks and credit unions that prefer a more

integrated approach. Jwaala understands the value of hard-wiring personal finance tools into the online-banking platform

(hence the product called Better Online Banking, or BOB, launched in January), aggregating the customer’s accounts in

one place and making the interface simple.

When it comes to keeping things intuitive, Jwaala boasts one of the niftiest twists we’ve seen: a Google-like natural

language search engine. Customers can simply type in parameters such as “Costco,” or “Costco last month” or “Costco

over $100,” and BOB will sift out the relevant transactions. Users also can use such searches to tailor financial alerts.

Javelin’s Point: By mid-April, Jwaala was live with 25 financial institutions, notably Amplify, a rebranded IBM

credit union in Austin, Texas, that helped shape the product, and Michigan First Credit Union, which raved about

BOB at the Net.Finance conference in Las Vegas in April. As enticing as Jwaala is, it still has room to grow and

improve, however. But we’ll delve into those details in an upcoming report to be published later in May.


Mint www.mint.com Founded: September 2007

VC backing: $17 million from Benchmark Capital, Shasta Ventures, First Round Capital and angel investors.

Employees: 30

Headquarters: Mountain View, CA

Mint should be on the radar of every bank and credit union – not because it’s a potential partner or a potential white-

label offering, but because it’s setting the bar for what consumers will expect from personal finance management tools.

Like Apple’s Steve Jobs, founder and CEO Aaron Patzer has an uncanny ability to see things from the consumer’s point

of view. Under his guidance, Mint has produced a user experience that is simple, intuitive and remarkably tempting.

That’s no small feat when you consider that we’re essentially talking about potentially off-putting topics such as

budgeting, saving and shopping for credit cards. Any bank, credit union or vendor must benchmark their PFM tool

against Mint – because that’s what 1 million registrants and the media are doing. Simply put, Mint has buzz.

Mint excels at aggregating the member’s accounts into one spot (via Yodlee) so they can see all their finances in one

spot and drill down into the data with ease. It also offers a tool that enables members to identify potentially cheaper

financial products such as credit cards. (This should worry any bank with pricey products because customers could

defect if they view banking products as a commodity. But it could be an opportunity for, say, credit unions that offer low-

priced products and want to present their products next to the big boys.)

At Finovate, Mint introduced Financial Fitness, which is designed to help members turn all that data into an actionable

financial plan. It’s based on five principles, each with action steps that can help consumers get closer to their goals:

Know where you spend your money (Mint’s strength), spend less than you earn, use debt wisely, invest what you save,

and prepare for unexpected events.

The key concept is that each category provides a means to measure progress, for example, by reviewing a credit report

annually (or through a monthly service provided by a Mint partner), sweeping idle funds into higher-yielding accounts, or

setting aside three months’ income for an emergency. Drawing a lesson from the success of the Wii Fit, Mint also has

sought to incorporate a “game-like” feel that minimizes the tedium of money. To provide positive reinforcement, Mint

notes how many consecutive months users have attained goals.

Javelin’s Point: At a bare minimum, PFM tools must achieve a certain look that immediately captures the customer’s attention. But to keep customers coming back – and justifying the financial institution’s investment – PFM tools must be practical and helpful. Simply displaying information won’t be adequate. The real test is whether Mint or its many competitors can spur consumers to take action and build healthy financial habits. Mint’s Financial Fitness is a step in that direction. Still, banks and credit unions are better off viewing Mint as a benchmark for usability than as a partner or vendor.


Rudder

www.rudder.com Founded: November 2007

VC backing: $2 million from Meakem Becker Venture Capital

Employees: 7

Headquarters: Houston, TX

Perhaps the best feature of this free consumer site is that its 45,000 registered users don’t even have to log in to take

advantage of it. Members can start their day or week by popping open e-mail summaries of their favorite financial

readings from their dashboard – the key innovation behind Rudder’s slogan of “personal finance in your inbox.” Rudder

boasts that 80% of its users either log in or open such e-mail summaries at least once a week.

Other ways Rudder stands out:

• Like Wesabe, Rudder aggregates account data with the help of CashEdge, providing users with a full look at

their accounts held at 3,500 financial institutions. • It emphasizes “forward-looking information” rather than past expenses. For example, a spending meter uses

past spending on rent, utilities and the like to project how much users will have left by the next payday. • Its user interface is based on a widget architecture, enabling users to customize their dashboard to display, say,

account balances, recent transactions and upcoming bills. These widgets are then replicated in the e-mail summaries.

• It has an iPhone application.

Javelin’s Point: One big limitation is that the free version of Rudder is limited to showing just 200 transactions;

upgrading to see unlimited transactions costs $14.99 annually – and most consumers aren’t willing to pay for PFM

tools. That means Rudder’s pay-to-play business model is dubious. Rudder remains focused on serving consumers

directly through its Web site, but in this economy, the startup isn’t setting that in stone. Small banks and credit unions

have approached the company about creating a white-label version, and executives say they are open to the idea. If

Rudder follows Wesabe and Geezeo down this path, it will be one to watch.


Strands

www.moneystrands.com Founded: September 2003

VC backing: $55 million from BBVA and Antonio Asensio, both of Spain

Employees: More than 100

Headquarters: Corvallis, OR

Finovate was barely a half-hour into the presentations when it became clear that the minimum ante for playing at the

PFM table is to have a look and feel that immediately seems fun and inviting. That hip look is now a must-have, not

merely a nice-to-have.

MoneyStrands scores on this level, though there really is little that’s fundamentally different in its use of icons, the widget

look, the pie chart of spending and fever line graphics. The most noticeable visual difference is the use of a fashionable

cartoon character named Monica (think of her as a 20-something version of Suze Orman) who apparently will pop up

periodically to inject advice or answer FAQs.

Other features of note:

• Users can use RSS feeds to direct third-party data such as personal finance news and updates through moneyStrands.

• Users can create PDF reports. (But we like Rudder’s e-mail idea better as a money-monitoring tool.) • It promised to upgraded it’s free iPhone app in May 11. • As the provider of the personal finance platform at BBVA in Spain, moneyStrands offers a Spanish version that

financial institutions can use to target the Latino market.

Javelin’s Point: MoneyStrands joins a notable pack of PFM sites that aggregate accounts into a free Web site (Mint,

Wesabe, Geezeo, Rudder, Yodlee, etc.). It offers users the ability to drill into their spending habits, examine cash-flow

trends, set up alerts and dabble with community feedback. But based on a seven-minute presentation and a spin

through its Web site it’s not obvious that moneyStrands stands distinctly apart.


Wesabe

www.wesabe.com Founded: November 2005

VC backing: $5.7 million from Union Square Ventures and O’Reilly AlphaTech Ventures

Employees: 15

Headquarters: San Francisco, CA

Wesabe is changing course. Though it originally set off down the direct-to-consumer path, the economic downturn has

forced it to look for immediate revenues. Six weeks after introducing a white-label product called Springboard to banks

and credit unions, it announced at Finovate that it had signed its first customer: Delta Community Credit Union,

Georgia’s largest credit union with 186,000 members. (That put it ahead of rival Geezeo, which announced in Q1 that it

also is taking a white-label approach. Geezeo announced its first customer on May 11 (Standard Federal Credit Union,

46,000 members).)

Like Mint, Wesabe aggregates the customer’s financial accounts into one place. That starts with feeds from CashEdge,

but it also enables the customer to pull account information from other financial institutions manually. It also has an

updated user interface that has an inviting look and feel, though it’s not as entrancing as Mint’s. But it does boast of

building a “community” where members can benchmark their spending against Wesabe members, spot good places to

shop and eat, and trade advice and encouragement about money.

At Finovate, Wesabe also played up several features with Gen Y wow power:

• Its new iPhone app, which uses Yahoo Local to recognize where the member is and populate transaction fields

automatically. • The ability to post financial transactions to your Wesabe account via Twitter. • Its Cutbacks tool, which identifies recurring expenses that members might want to pare in tight times. • Its community forum and social features.

Javelin’s Point: Wesabe deserves a look from smaller banks or credit unions that seek an instant PFM upgrade. But

its white-label product is unproven, and it remains to be seen just how tightly it can be integrated into the online-

banking platform so that customers can act on what they see in Wesabe.


Payments

Acculynk

www.acculynk.com Company Founded: March 2008

VC backing: $12.5 million Series A funding (Oak Investment Partners)

Employees: 12

Headquarters: Atlanta, GA

PaySecure, launched in March 2009, allows consumers to use PIN debit to pay for online purchases, bringing the safety

and convenience of PIN debit online with a service that integrates into the merchant checkout with no consumer

enrollment or redirection.

During the online checkout process, the customer enters his debit card number. After Acculynk determines the card is a

debit card and the bank is in its network of participating issuers, a floating PIN pad window is generated. The numbers

on the virtual PIN pad randomly shuffle after the entry of each PIN digit to provide an additional layer of security against

malware such as keystroke loggers. Acculynk is currently partnered with five EFT networks – PULSE, NYCE, ACCEL/

Exchange, and two undisclosed -- to allow transactions.

A few highlights of Acculynk Paysecure from Finovate:

• It provides an extra layer of protection against malware such as keyloggers with a scrambling PIN pad. • It takes advantage of the millions of debit cards in circulation. • It provides value to merchants in reduced transaction costs.

Javelin’s Point: Wesabe deserves a look from smaller banks or credit unions that seek an instant PFM upgrade. But

its white-label product is unproven, and it remains to be seen just how tightly it can be integrated into the online-

banking platform so that customers can act on what they see in Wesabe.


HomeATM

www.HomeATM.net Founded: 2006

VC Backing: N/A

Employees: N/A

Headquarters: Montreal, Quebec

Launched in April 2009, P2P Safe-T-PIN offers home-based “card present” credit card and PIN debit transactions online

using a PCI-certified device attached to a personal computer through a USB port. Users also could make online

purchases by swiping their credit card or debit card and PIN at checkout. The device allows for secure real-time money

movement with an option for delayed transactions.

Here’s how it works: To initiate a P2P transfer, a remitter enters the transfer amount and the e-mail address of the

recipient, swipes an ATM card through the HomeATM device and then enters the PIN. The transaction is encrypted

across the Web, and both the remitter and recipient receive an e-mail confirming the transaction. The recipient’s e-mail

contains the transaction link, remittance ID and password. The recipient then clicks on the e-mail link to find the

transaction, enters the ID and password, swipes the ATM card through her own device, and then enters the PIN to

complete the funds transfer into her debit account.

Here are a few differentiators of the HomeATM:

• A HomeATM Mobile device will be also available for mobile phones with Web access, allowing transactions on the go.

• PCI-certified device. • Hardware-based end-to-end encryption. • 100% acceptance with all bank cards.

Javelin Point: There is greater potential for HomeATM as a frequent high-value P2P solution such as a Western

Union money transfer than for enabling e-commerce. Many consumers may be hesitant to swipe their ATM cards on

hardware attached to their computer because of security concerns. It’s also hard to imagine that consumers will be

willing to purchase hardware to enable online transactions when a low-cost payment method already is in place.

Presenting another huge obstacle, HomeATM requires hardware for both parties in order to complete a P2P debit

transaction.


MoBank

www.mobank.us Founded: December 2006

VC backing: $1.5 million (The University of Oxford, 15 private investors)

Employees: N/A

Headquarters: London, England and Menlo Park, CA

Launched for the Apple iPhone in April 2009, MoBank Convenient Transactions aggregates the whole of the e-

commerce Web and presents content in a simple-to-use application. Commerce sites are organized into categories

within the application (i.e. transport, entertainment, books, etc.), which the user can then scroll through and click to

select.

After selecting the desired category, users are given a number of merchants from which to shop and search for

products. At checkout, payment details such as card number and expiration date need to be entered only once, then a

four-digit PIN set by the user is used to confirm any future online transactions with the MoBank application. FTD,

Domino’s Pizza and Hallmark are currently onboard as merchant partners with MoBank.

Features of MoBank:

• Available on the Apple iPhone. • Currently active in the United Kingdom. • Plans to offer application on other smartphones.

Javelin Point: MoBank Convenient Transactions seems like a useful application for the growing mobile commerce

segment and as an interim solution before the fully functional mobile wallet takes hold. Storing card information will

raise red flags among some consumers. In order to achieve more widespread adoption in the United States, MoBank

must first partner with top-tier e-commerce retailers and service providers.


Moneta

www.monetacorp.com Founded: September 2008

VC backing: $2 million (NCRT, Dellwood Associates)

Employees: 10

Headquarters: Atlanta, GA

Launched in September 2008, Moneta’s online-payments service is designed to let consumers use non-credit payment

alternatives when shopping online. Similar to PayPal, Moneta allows online purchases for consumers who prefer to pay

with a credit or debit alternative. Using the ACH payments architecture, Moneta automatically debits the user’s linked

checking or money market account when making a purchase online.

During checkout, the shopper selects Moneta as the payment method rather than Visa, MasterCard, Discover or

American Express, and the user is prompted to enter her Moneta user name and password. After confirmation of

credentials, the purchase is completed, and the required funds are directly debited from the user’s checking or money

market account. With more than 60,000 registered users, Moneta has partnered with merchants such as Delta Air Lines,

Shoebuy.com, and ID90.

Here’s where Moneta stand out:

• Automatically debits the user’s checking or money market account for online purchases. • Requires neither a credit or debit card. • Fast and convenient.

Javelin Point: Moneta appears to be a fast and convenient payment method for consumers seeking to use a non-

debit alternative. However, it is unlikely to gain serious traction until major e-commerce merchants see the value in the

reduced transaction costs and banks are convinced their current transaction revenues will not suffer. Payment

networks also might resist strongly because they will be extremely wary of losing their valuable position in the

transaction stream.


SeerGate

www.seergate.com Founded: May 2007

VC backing: N/A, pre-revenue stage

Employees: 15

Headquarters: San Bruno, CA

Targeted to launch in June 2009, SeerGate’s Secured Lock e-Debit System uses a social media application to initiate a

secure, real-time P2P transfer. The system attempts to ensure that current and future e-payment alternatives remain

bank products.

Demonstrated using a Facebook application, the sender selects the dollar amount and a recipient for the transfer, then is

transferred to the sender’s online banking log-in. After the sender’s online credentials are authenticated, the recipient

receives a message through Facebook from the sender, along with a link and PIN to complete the transfer. By clicking

on the link within Facebook, the recipient is directed to his or her own online banking log-in within the Seergate e-Debit

application enters their log-in information, and the funds transfer is completed.

Some of SeerGate’s features of note:

• It uses large social media networks (Facebook, MySpace) to link a P2P transfer. • It ensures e-payment alternative remain bank products. • Transactions are real-time debit, not ACH.

Javelin Point: SeerGate’s e-Debit system has potential as a unique Gen Y targeted P2P payment solution using

social media as the gateway for linking a funds transfer. It also could be a viable method for global remittances or B2B

transactions. But to create a large enough network for likely adoption, SeerGate must partner with the largest banks

both domestically and globally, because the application requires both the payee and recipient to bank with a financial

institution that uses the system. SeerGate must convince both banks and consumers of the security and added value

of its payment method. Along with the threat of increased phishing attacks within Facebook, these are significant

obstacles.


P2P Lending Prosper (voted Best of Show)

P2P lending Web site: www.prosper.com Founded: February 2006 VC backing: $40 million raised from Accel Partners, Benchmark Capital, DAG Ventures, Fidelity Ventures, Meritech Capital Partners, Omidyar Network Headquarters: San Francisco, CA Lending Club

P2P lending Web site: www.lendingclub.com Founded: October 2006 VC backing: Undisclosed amount by Norwest Venture Partners, Canaan Partners and Morgenthaler Ventures Headquarters: Sunnyvale, CA Pertuity Direct

P2P lending through mutual fund investing www.pertuitydirect.com Founded: 2007 VC backing: $3 million to $5 million from private equity and angel investors Headquarters: Vienna, VA The buzz is beginning to build again for P2P lending. The industry has been forced to reinvent itself since regulators

began scrutinizing it in 2008 to ensure that investors were properly informed about the investment risks. Finovate


featured presentations from three players, each of which is taking a distinctly different approach to the concept of

enabling consumers to lend to other consumers:

• Prosper lets investors bid on loan requests in an auction environment. • Lending Club underwrites loans, then lets investors buy stakes in investment notes. • Pertuity Direct enables investors to buy shares in a mutual fund made up of individual loans.

Prosper is the biggest name of the trio. It boasts of funding more than $178 million in loans dating to 2006 and drawing

more than 800,000 users, giving it the predominant share of the P2P market. It is run by eLoan founder Chris Larsen

and has enticed $40 million in high-powered VC backing. It just announced it has developed a secondary market

through FolioFn that provides liquidity to investors who want to cash out. It wasn’t at all surprising to see Prosper win

one of the four “best of show” awards at Finovate. Nonetheless, despite winning approval in late April from California regulators to resume making certain loans on a

limited basis to state residents, Prosper announced in May it that had “voluntarily shut down” while it seeks regulatory

approval from the Securities and Exchange Commission – a process that already has taken a half-year. Prosper’s

regulatory headaches are significant. Last fall the SEC issued a cease-and-desist order, and state regulators levied a $1

million fine and forced Prosper to stop offering securities until it complies with registration rules. Investors holding loans

that Prosper failed to properly register also could file lawsuits if their loans prove uncollectible. Lending Club primarily acts as a middleman between lenders and borrowers seeking loans that typically range from

$1,000 to $25,000. The company runs a credit check on borrowers, sorts loans into 35 loan grades, then creates

unsecured three-year notes for each loan with interest rates that are pegged to the risk of the underlying borrower.

Investors then can hunt through the loan listings or use its “Lending Match” tool to buy small stakes in individual notes

and build a portfolio of loans. On average, borrowers have a FICO score of 713, the company said.

Since making its first loan in June 2007, Lending Club has facilitated about $35 million in loans. In April 2008, it became

the first peer-to-peer lender to undergo the Securities and Exchange Commission’s gauntlet. Lending Club suspended

individual loan investments during a six-month review, reopening to lenders and introducing a secondary marketplace for

their loans on Oct. 14, 2008. Pertuity Direct stretches the definition of peer-to-peer lending. More accurately, it’s a mutual fund that invests in loans.

Investors can pony up as little as $250, and Pertuity Direct partners with the National Retail Fund to pool their

investments into an investment fund. As National Retail Fund puts it on its Web site, that “means no bidding and

guessing about whom to select for your investment.” In short, the consumer is a passive investor rather than an active

lender.


1 Person-to-Person Lending: Strong Consumer Demand Forecast Calls for Bank Partnerships, Javelin Strategy & research, December 2007.

Javelin’s Point: Javelin concluded in 2007 that there is a sizable need for peer-to-peer loans, mostly among

consumers seeking to refinance billions in credit card debt.1 The current credit crunch and tightening underwriting

standards on credit cards could stoke the need for alternative sources of lending, too. It is likely that Prosper will

emerge from its regulatory quiet period and regain its top-dog status in the national P2P lending market, but many

investors will be more comfortable with Lending Club’s underwriting and investment model. Pertuity Direct is likely

to get lost amidst the crowd of specialty mutual funds.

More broadly, questions remain about the viability of the P2P lending industry. P2P lending will not thrive unless

there is a ready supply of willing borrowers and investors. As the recession has clawed into investors’ net worth

and savaged their willingness to take risks, the pool of investor capital has tightened. The regulatory scrutiny also

cast a cloud over the industry, forcing Lending Club and Prosper to suspend operations rather than continue to

build momentum for P2P lending. The industry will be the better in the end because it will earn a regulatory seal of

approval and it led to the development of secondary markets for these investments. But there’s little reason to

think that P2P lending will explode and threaten traditional lenders any time soon.


Financial Tools

BillShrink (voted Best of Show) www.billshrink.com Founded: July 2007

VC backing: $9 million (Bessemer Ventures, Trinity Ventures)

Employees: 11

Headquarters: Redwood City, CA

BillShrink, launched in March 2009, is a tool designed to help consumers save money on wireless plans, credit cards,

and other everyday bills. After users answer a few questions regarding their bills and usage, BillShrink searches millions

of online data points from public data sources to find and instantly present money-saving product alternatives that match

actual usage. By continuously analyzing market changes, BillShrink claims it can provide an e-mail alert if a better

savings opportunity becomes available.

BillShrink has gotten good ink in the Wall Street Journal and other publications recently for its wireless plan savings tool.

Users are prompted to either import their wireless bill or manually enter the details of their mobile usage such as

provider, minutes used, number of text messages sent, data plan, frequent numbers called, and months remaining on

their contract. After analyzing the data, BillShrink calculates the estimated savings and additional costs on a variety of

plans from four large providers: AT&T, Verizon, Sprint and T-Mobile. Along with the listing of each plan there is a link

that users can click to switch their service.

BillShrink also offers a tool that recommends gas stations with low-priced fuel. Users enter their home and work ZIP

codes so the tool can calculate a typical commute path. Users also have the option to enter their vehicle make, model,

year and engine size to help more accurately determine usage and costs. After users identify locations of their preferred

stations from a list, BIllShrink immediately presents gas station recommendations based on the projected savings using

the reported prices and distance from the user’s estimated commute path.

With reported Web traffic tripling to more than 200,000 unique visitors in March alone, BillShrink’s savings potential is

gathering plenty of momentum in this economic environment.

Javelin Point: The gas savings tool seems a bit impractical for everyday use. Will consumers really go to that extent and drive a little farther to possibly save $2 on a tank of gas? BillShrink’s tool, which tracks both the credit card Customer Bill of Rights and card issuer’s compliance, is intriguing, especially with accusations of rate-jacking and increased government regulations. Telecoms and card issuers could achieve greater transparency if they offered such a tool in their online suite, but it seems highly unlikely because they would place more power into the hands of consumers.


Centrro (KnowBeforeYouApply.com)

www.knowbeforeyouapply.com Founded: April 2006

VC backing: None reported.

Headquarters: Oakland, CA

KnowBeforeYouApply.com is a beta consumer Web site built around the idea that nobody likes to apply for mortgages

and credit cards they truly can’t qualify for because their credit score is too low. That complaint is commonplace because

lenders often dangle tantalizingly low teaser rates that they know only borrowers with top-notch credit can hope to lock in

– but they nonetheless get valuable leads on borrowers who might fit into higher-rate products.

KnowBeforeYouApply.com’s answer to that problem is to prescreen applicants by evaluating their FICO score and

presenting them only with offers that fit their credit profile. The startup boasts that it has worked out a deal with credit

bureaus to do a “soft ping” that enables the company to check the applicants’ scores without damaging their FICO score.

According to KnowBeforeYouApply.com, this pre-screening process has enabled lenders to approve 80% to 90% of

applicants – three to six times the typical approval rate, it says.

Javelin’s Point: This is one of those propositions that needs to prove it can live up to its consumer-first claims.

KnowBeforeYouApply.com’s power will be dictated by how big a pool of loan products it can offer; consumers will

have reason to be wary if the selection is limited to a handful of advertising partners. It also relies on lenders to share

their loan terms and underwriting criteria, which is a function of the institution’s transparency and the Web site’s ability

to update loan criteria as lending and economic conditions shift from day to day or even hour to hour. At this point,

there’s no consumer feedback mechanism to keep lenders honest. And the beta site demands information from

potential consumers before taking the time to explain the proposition and soothe the anxieties of those who are wary

about the process or divulging their personal information.


Credit Karma

www.creditkarma.com Founded: July 2007

VC backing: None reported


Credit Karma’s aim is to stand apart from ventures that charge consumers to monitor their credit report by giving it away

for free. (“We believe free access to one’s credit score and report is a fundamental consumer right.”) In return, Credit

Karma acts as a conduit for advertising partners seeking to extend tailored marketing offers to users based on their

credit profile and their answers to about 20 questions.

Though it launched its beta site in April, Credit Karma boasts that it already has more than 300,000 registered users.

And what they get appears to be quite slick:

• A fever line chart tracking their credit score over time. • Bar charts showing users where their credit scores rank compared with other consumers. • A credit simulator that projects how consumers can improve their credit score if they pay down debts, close

accounts or take other actions.

Javelin’s Point: Credit Karma makes a strong pitch to consumers who want to improve their credit scores, and its

prospects are bright as a consumer Web site. It has the potential to be the Mint of credit monitoring, and tough

economic times will fuel the appetite for such services. But at a time when the banking industry is struggling and

remains selective about investments, for the foreseeable future it’s unlikely that banks or credit unions will rush to bolt

on a white-label version.


Expensify

www.expensify.com Founded: April 2008

VC backing: Self-financed

Employees: 2 full-time, 3 part-time


Launched in March 2009, Expensify is an online tracking tool that enables small businesses to import business

expenses and receipts from credit cards into expense reports. Through the site, users also can apply for certain

business credit cards and a free prepaid business MasterCard.

Expensify eliminates the need for paper by creating a full e-receipt complete with necessary accounting information.

Analog paper receipts can be scanned or photographed using a camera phone, then submitted via e-mail to be imported

into a user’s expense report. Expenses are broken down into categories, and a full PDF report can be submitted to a

manager, who can then accept or reject transactions. Approved expenses can then be paid via direct deposit or simply

tracked.

Other ways Expensify stands out:

• Expensify iPhone App is available. • Receipts can be instantly imported into Expensify via SMS text message for miscellaneous expenses that don’t

provide receipts (i.e. taxi cabs).

Javelin Point: At first glance, Expensify looks like an extremely handy tool for smaller business operations with one to

three employees because it requires neither software nor online banking to track expenses. This solution could be

seen as a viable alternative or a complement to a more costly online business banking suite that can easily store and

organize receipts.


Kapitall

www.kapitall.com Founded: March 2008

VC backing: N/A

Employees: N/A

Headquarters: New York, NY

Currently in beta testing and slated for launch in summer 2009, Kapitall is a rich Web application that attempts to make

investing easy for even the novice investor. Inspired by game design and using an Apple-like approach to investing,

information is organized spatially on a large “playground” similar to a large dashboard or computer desktop. Users can

share transactions and collaborate with friends, even compete with other investors.

Companies are represented by large icons that can be dragged and dropped across the playground into windows to

perform various tasks such as buying or selling shares and other advanced analytics. A stock ticker runs across the

bottom of the “playground” to keep users up-to-date on relevant news and analyst recommendations.

Javelin Point: Kapitall uses an innovative “dashboard” style tool for making investing simple, fun, and engaging

instead of stale and static. The offering has the look and feel of an Apple desktop. With attractive features and an

enjoyable interface, Kapitall has potential as an investment platform; especially enticing for Gen Y consumers raised

in the digital age who are looking for ways to invest their growing incomes.


SimpliFi (voted Best of Show)

www.simplifi.net Founded: 2004

VC backing: $1 million from Insight Capital

Employees: Not reported Headquarters: Winston-Salem, NC

One of the biggest problems in the financial-planning industry is that middle-class Americans simply aren’t wealthy

enough to afford comprehensive personal service. Instead, they generally must rely on advice from “free” but conflicted

financial advisers who earn commissions by selling products for financial institutions, brokerages, insurance firms and

other financial firms. The Garrett Planning Network draws headlines for attempting to address this need with affordable

planning advice by the hour, but the network remains too small to make a wide impact. SimpliFi’s goal is to plug this

gap by providing the registered investment adviser’s Web-based financial-planning tools to do-it-yourselfers.

Starting in 2005, SimpliFi began licensing its product to credit unions who view it as a complement to online-banking. It

serves 12 credit unions with assets ranging from $250 million to $5 billion. It boasts of having 30,000 registered users,

including 18,000 who have completed financial plans, and that its typical client is a 38-year-old woman with $85,000 in

income. Profitable since 2007, SimpliFi seeks to broaden its reach in the United States with its sleek-looking direct-to-

consumer site, then take aim at Canada, Australia and England.

Javelin’s Point: The executives at SimpliFi have their hearts in the right place, but the obstacles they face are

daunting. Financial planning is most effective when it is tailored to individual circumstances, and the combination of

financial complexity and human behavior begs for face-to-face discussions, hand-holding and sometimes even

nagging. During the dot-com days, Financial Engines rolled out a ground-breaking service to help workers tend their

401(k)s, but the firm was forced to rewrite its business plan and target business alliances with firms like Vanguard,

then add call-center advisory services to provide a human dimension. It’s hard to fathom that SimpliFi can attain its

goals with software and its cartoon avatar called “Sophie.”


Security

Silver Tail Systems (voted Best of Show)

www.silvertailsystems.com Founded: January 2008

VC backing: $2.1 million Series A funding (LeapFrog Ventures, Seraph Group, Startup Capital Ventures)

Employees: 10

Headquarters: Palo Alto, CA

Founded by former eBay and PayPal fraud analysts, Silver Tail Forensics launched in March 2009. Silver Tail automates

what fraud analysts monitor and uses advanced fraud analytics such as geolocation and click-stream parameters to look

at the entire Web session and compare it to average users of the site. By trending data and breaking out threats by type,

Silver Tail Forensics claims it can stop a variety of threats such as man-in-the-browser attacks where malware makes

illegal transfers using the same Internet browser and domain when users log in to online banking. With Fortune 500

companies onboard as customers, including financial institutions and e-commerce retailers, Silver Tail is already

demonstrating that fraud prevention and detection is a worthy investment.

Javelin Point: With online fraud becoming more sophisticated and more commonplace due to economic conditions2,

advanced real-time fraud analytics could help prevent and detect fraud sooner, reducing overall amount of fraud.

Based on costs, this could be a viable solution for merchants, mid-size banks and credit unions that are looking to

mitigate fraud but lack the internal resources for more robust fraud monitoring.

2 2009 Identity Fraud Survey Report: Identity Fraud on the Rise But Consumer Costs Plummet as Protections Increase, Javelin Strategy & Research, February 2009.


Marketing Tools

Micronotes

www.micronotes.com Founded: June 2008

VC backing: Self-funded. It has raised $2 million to date but is seeking an additional $1.5 million “to get through the

year.” It has $500,000 in commitments.

Employees: 7

Headquarters: Cambridge, MA

There arguably is no better way for a bank or credit union to clinch the claim that they are a customer’s primary financial

institution than to develop the customer’s bill-pay habit. But Javelin consumer data underscores the problem and

challenge: Online-banking customers increasingly are clicking straight to the biller rather than paying through their bank

or credit union.3 Micronotes offers hope of reversing that trend by rewarding customers who pay through the bill-pay

platform.

Here’s the premise: Micronotes cuts deals with large consumer brands like Hewlett-Packard that want to target offers to

consumers who are likely to buy. Micronotes then identifies likely buyers by analyzing the spending data of bill-pay

customers who opt in. Then, while customers are paying bills at their bank or credit union, Micronotes briefly interrupts to

ask three questions related to relevant consumer products. Answering these questions takes only seconds, and bill-pay

customers are immediately rewarded with cash deposited into their bank account, as well as a marketing offer.

Javelin’s Point: On paper, this is one of those win-win-win propositions, with something for the bank, the consumer

and the consumer brand. Whether it works out in reality will depend on such factors as:

• The quality, breadth and relevance of the marketing offers.

• Whether consumers feel the rewards are substantial enough to slow down a bill-pay chore that they typically

want to finish up as quickly as possible.

• Whether it inadvertently triggers calls to call centers.

3 2008 Online Banking and Bill Payment Forecast: Financial Crisis Makes it More Vital Than Ever to Target Online Channel, Javelin Strategy & Research, November 2008.


Related Research Person-to-Person Lending: Strong Consumer Demand Forecast Calls for Bank Partnerships (December 2007)

Person-to-person (P2P) lending integrates online social communities with financial services and represents the next level of consumer-driven financial interaction. This report examines the market potential of P2P lending services in the immediate term, focusing on the potential impact on credit card debt. Javelin quantitative data reveals the consumer groups most engaged in the P2P space and their motivations for participating. It also forms the basis of an analysis as to how FIs fit in with social lending communities, and the ways in which they can develop partnerships with such communities to retain deposits, influence brand affinity, and evolve their institutions with Web 2.0 developments.

2009 Identity Fraud Survey Report: Identity Fraud on the Rise But Consumer Costs Plummet as Protections Increase (February 2009)

For the first time in the past five years, identity fraud rates increased over the prior year. Yet during the same period, average consumer costs decreased sharply. The Javelin 2009 Identity Fraud Survey Report provides a detailed, comprehensive analysis of identity fraud in the United States in order to help consumers and businesses better understand the effectiveness of methods used for its prevention, detection and resolution. A nationally representative sample of almost 4,800 U.S. adults, including 487 fraud victims, was surveyed via a 50-question phone interview to gain insight into this crime and the effects on its victims. This report, supported by the Better Business Bureau, is issued as a longitudinal update to the Javelin 2005, 2006, 2007 and 2008 Identity Fraud Survey reports.

2008 Online Banking and Bill Payment Forecast: Financial Crisis Makes it More Vital Than Ever to Target Online Channel (November 2008)

Whether banks and credit unions weather – or even survive – the worst banking crisis since the Depression is likely to depend on their ability to grow their assets. Unsettled by bank failures, anxious Americans have taken a flight to safety that has left many financial institutions struggling to attract and retain deposits. But industry tumult and fearful times create an opportunity for banks and credit unions with online-banking services that satisfy the consumers’ craving for financial control, tools to monitor and protect their accounts, and a means to consolidate their financial relationships. Now, more than ever, financial institutions must provide customers with – and actively promote – a robust, useful online-banking platform that will help customers better manage, monitor and move their money on a daily basis.

8%

16%

56%

64%

64%

68%

0% 20% 40% 60% 80%

Changes to PIN

Addition or subtraction of registered users

Phone number

Changes to login password

Physical address change

E-mail address change

n = 25Base: All FIs surveyed.

© 2008 Javelin Strategy & Research

$48$45

$50

$57$60

4.25% 4.00% 3.74% 3.58%

4.32%

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

$0

$10

$20

$30

$40

$50

$60

$70

20082007200620052004

2008;2007;2006;2005;2004,n = 4474;5075;5008;5003;5004 Base: All respondents.

© 2009 Javelin Strategy & ResearchQ32: What is the approximate dollar value of what the person obtained while misusing your information?

(in B

illio

ns)

(Incidence Rate)

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