Webware

SAN FRANCISCO--At the FinovateStartup conference, one thing is clear: a lackluster economy can be the best time for financial start-ups to get new users.

Apps that help people track and manage funds outside of their bank or investment service's site are in high demand, and many of the services presenting at the conference are trying to get those financial companies on board.

Why? Because those companies are still the gate keepers of trust. People are more willing to hand over their account credentials and detailed personal information to larger institutions over some hot, new Silicon Valley start-up. That, and it's a whole lot easier to get in the door if you're built into a financial institution's tools. The hard part of course, is proving you have a system that really works.

To that end, nearly all the sites that gave quick, eight-minute pitches at the financial innovation conference are trying more user-friendly approaches to common financial activities such as keeping an eye on bank accounts, managing and paying off loans, or helping people sign up for credit cards.

One site, KnowBeforeYouApply is simply taking user credit history, then recommending various cards people could sign up for based on that. Another card play, called Tempo, is trying to make debit cards more like credit cards. It's offering a third-party card that's linked up to a user's checking account, which skips the monthly bill in place of taking the money out as soon as it's spent. It also includes personalization and promotions, things that aren't usually offered by the banks that supply them.

Sites featuring simple, colorful charts, tables, and status bars are also aplenty. These charts aren't just for looks, though; for these sites, it's all about aggregation. Just like Facebook and FriendFeed are working to harness the never-ending flow of social information, these sites are attempting the same with accounts from multiple services. Even if it's not a core part of a product, companies want to keep users inside their apps with a dashboard that lets them view dozens of streams of information within a very small amount of space.

Kapitall's creative director Cordell Ratzlaff demos his company's financial Web top.

(Credit: Josh Lowensohn / CNET)

One of the best examples of this is Kapitall, which is designed like a Web desktop. It has a customizable workspace of company icons and portfolios that users can drag and drop to track their investments and compare sets of data. Creative director Cordell Ratzlaff calls this workspace "the playground," which sits atop a never-ending stock ticker with companies you're watching. It seems like a total data overload at first, but Ratzlaff managed to create and organize portfolios as if he were moving around picture files on a desktop PC. It actually looked kind of fun.

Speaking of fun, there were even finance tools for kids. IThryv, which launched late last year has a financial dashboard with account info and goal-tracking aimed at tweens. It's also set to expand to other demographics like senior citizens who are managing finances on a fixed income.

Not all the sites on display at Finovate are aimed at consumers, though. A few are focused on business users while retaining the look and feel of a consumer app. Expensify, which handles expense reports, is one such site. It links up to your checking account and can track purchases you've made while on a trip, and pay out directly to it. It even lets you add receipts for payments made in cash by using your cell phone's camera.

Looking forward
So what are some of the big financial trends to look for in 2009 and beyond? White-label services and mobile apps are likely to top the list. Wesabe, which is a dashboard for consumer finances (similar to Mint.com), recently introduced a version of its services that banks can give to their users as a way to track their financial activities. The company has already done this with a Delta Community Credit Union but wants to expand to other markets, too. The same goes for payment and loan services, which want to be more deeply integrated as payment options in places like hospitals and online retailers.

Each service also wants to make sure users can access their apps while away from a desktop PC in the form of a secure mobile application. Most companies who mentioned either having or working on mobile applications cited the iPhone, which could become its own payment tool since developers will soon be able to offer in-app payments that are linked up directly to user bank accounts.

With all these tools it seems as if the ultimate goal is to make it so users don't have to go out of their way to sign up to use them. Yet it requires a far more intense commitment and trust than a simple e-mail address and Captcha, which makes me wonder if 2009 will bring a Facebook Connect for finance.

In advance of the Finovate ("Financial Innovation") conference that kicks off on Tuesday in San Francisco, I talked with Chris Larsen about his peer-to-peer lending company, Prosper. The prospects for peer-to-peer lending dimmed last year when the Securities and Exchange Commission decided to regulate some of the P2P financial instruments as securities; this forced P2P lending companies to retrench as they'd previously been treated more like banks. Prosper itself shut down its lending platform six months ago.

However, California in particular is getting ahead of the game and has given Prosper the green light to start up again and to operate its latest service, a trading platform called Open Market that lets any financial institution securitize (package and re-sell) its portfolio of loans to individual P2P lenders.

With the credit markets still reeling from the 2008 Wall Street collapse, Larsen says "credit in the street is needed now more than anything," and that his company's new feature enables that by providing liquidity to banks. The new loan-trading platform gives secondary loan buyers full visualization into loans currently being serviced by a financial institution.

So instead of a bunch of mortgages being collected and then rated by a rating agency, a method that obscured value and contributed to landing our economy in the mess it is in now, buyers of loan securities could see all the way down to the individual loans if they wanted, and could, theoretically, choose to buy only certain ones. Prosper securitized loan packages will be sold on auction, again providing a level of transparency to their true value.

Only loans currently being serviced--and with at least three months of payments against them--are eligible for these securities.

Prosper Open Market lets banks securitize their consumer loans without going through ratings agencies or putting their loans into giant pools.

(Credit: Prosper)

I'm sure I am missing some key financial details here, but the upshot is that the Prosper lending platform removes one of the bottlenecks that shunted nearly all security-related instruments through New York ratings firms.

Prosper will continue to also operate its person-to-person lending system, so individuals can loan money to, and get loans from, their neighbors. As before, options in the Prosper system let borrowers and lenders spread their transactions around. For example, if you're looking for a $5,000 small-business loan and I'm lending money via Prosper, I wouldn't lend you all of it; rather, if I had $5,000 to lend, I'd lend little pieces of that fund to people who meet the criteria I specify. You might end up with $100 of my money. This reduces risk for both of us. At least in California, where the Department of Corporations has authorized P2P lending in the state.

Larsen appreciates the "regulatory clarity" he's getting in California in advance of the federal government's SEC approval. He thinks it's fitting for California. "You can see a path to new technology in finance" in the state, he says. And, he says, a distributed, transparent loan marketplace is needed urgently. The "fragile" economy has had a single point of failure thus far, and it indeed did fail, so "this is the golden opportunity for new credit systems," Larsen says.

Prosper has about 800,000 users, Larsen says. About 100,000 of those are currently lenders. The average loan amount is $6,000, and $180 million has been leant through the system to date.

Related: Peer-to-peer lending is not dead yet

There's yet another free online finance site to check out if you're interested in having a computer tell you what to do with your money. And, honestly, if you're like most people, it probably wouldn't be a bad idea. This one is called Thrive. It's designed for young professionals (people in their 20s and 30s) and is differentiated by the level of advice it offers. CEO Avi Karnani wants this group of people to have access to the same level of insight and intelligence that financial planners provide for the affluent.

But first, a bit about Karnani. Before starting this service, he worked in institutional finance, in hedge funds and arbitrage. When I found this out, I asked him, "And we're supposed to trust you?" His response: "I know just how complex finances are. And what's done for people who have more money is vastly more beneficial to them than what's offered to people without a lot. It shouldn't be that hard to do, there just haven't been companies that wanted to do it.

Basic advice: Spend less.

(Credit: Thrive)

Like Mint and other financial sites (see Buxfer, Wesabe), Thrive goes out to financial institutions on your behalf and collects all your spending, debt, and investing data. It shows you where your money is and categories your activities. That's the cost of entry in this space.

Thrive then looks at your activity, and comes up with recommendations to help you best manage your money. It will advise you on how best to pay down your debts, how your cash should be distributed among your checking and savings accounts, and where you should be cutting back on spending. There's no social angle in the service, yet.

Karnani told me the Thrive won't advise you to cut back on things you can't, like your garbage bill or mortgage, but it will come up with three achievable goals at a time for each user. In my case, they were all spending reductions: It advised me to cut back 10 percent on cash withdrawals, travel, and groceries. I looked at the advice and thought, I can do that. "It's a lot easier to make changes in your day to day purchases," Karnani believes, which is one of the reason the service gives you mundane budget advice as well as allocation plans.

Good to know.

The service gives you an overall financial score, which it calculates for you based on your spending, your retirement planning, your ready access to cash for emergencies, and 11 other "dimensions," Karnani told me. In the future, the score will also take into consideration your credit score (via a new partnership with Credit.com), and when it gives you advice it will factor in how things will affect that score.

Advice on what to do with your stocks is forthcoming, and I'll be curious to see how the site handles speculative investments.

I found that Thrive's presentation of current financial activity less comprehensive and useful than Mint's. Thrive's advice is better, though.

To use the service, you have to get past the fear of giving it your financial passwords. Karnani told me his site is as secure as Mint, and uses a similar architecture to safeguard financial data.

The company has raised about $2 million from undisclosed investors. Thrive makes money from referral fees to banks, and Karnani emphasized to me that the site's advice engine is completely independent of its business relationships. The product will be unveiled at the Finovate conference Tuesday in New York.

Intuit has finally dropped the subscription fee on Quicken Online, its Web-based financial software that competes with Mint, Geezeo, Buxfer, and Wesabe. The company is still selling, as completely separate products, software versions of Quicken.

When I last covered Quicken Online in December 2007, my biggest complaint was its price. In a market with free (and very good) competitors, there was just no reason to pay for Quicken Online. This is a smart move on Intuit's part. But while Intuit Online is a solid service, the online competitors keep getting better, too. It's unclear to me that Intuit's history will translate into market share in this competitive market.

Intuit is also still preparing to release its iPhone app that accesses Quicken Online data, as I wrote in December. No word on when that ships.

High customer support costs and an angry customer base (check out the user review scores for Quicken and Money) make standalone financial apps like Quicken and Microsoft Money questionable product lines for their makers, and when the online services take hold I will expect their demise. Devoted Quicken users like me, though, will need more capabilities (like bill paying and support for complex investment transactions) before we can make the transition, and the public at large has yet to be convinced that these online financial data storehouses can be trusted.

A quick snapshot of your cashflow (2007 version of Quicken Online)

(Credit: Intuit)

See also: Quicken Beam: Your finances made cute.

There's more online financial news coming tomorrow morning from the Finovate conference. Check back here.

Inner8 is a recently launched social-stock picking service. CEO Doug Doyle says the company's mission is to provide an online alternative to the traditional investment advisor, who, he says, typically underperforms the market at large. Obviously, that's never been more true than in recent days, making Doyle's goal to, "steal share from the advice industry," quite modest. If, that is, there remains any industry to steal share from.

Inner8 is indeed a good source of investment ideas, but it's no replacement for an advisor. It's too technical and too involved. You can't just put your money in its hands and walk away. Not that you should do that with an advisor, either, but if the goal is to provide users with the same appearance of full-service management that they get with personal advisors, Inner8 is a failure.

This investor, whose investing style is a 99 percent match with mine, is only 25 percent accurate in his predictions. Maybe I need to take advice from people with different mindsets.

But it is a solid stock community, and worth exploring by anyone who is fed up with either advisors or with the current tools for selecting investments, and who realizes that they would do well to spend some time with their money if they want it to work for them.

The site has two main feature areas. First, it's a social stock site. You tell the service what your investing profile is like (though a questionnaire) and it will find other users who are similar to you. Then you can see what they're recommending. You can also have it select the users who are the most unlike you, if you're looking for a fresh perspective.

Second, it's a prediction market. But its mechanics are greatly simplified from most other prediction markets, where you wager fake money on real outcomes and where the best performers are the ones who have won most of these virtual bucks. In Inner8, you select a stock, and then, from a slider, predict the price of it one month out. The system tracks your performance and calculates your accuracy score over time. Doyle says it's a better system than the standard social stock site method of rating users' portfolios based on ROI, since those can be heavily skewed by hail-Mary investments that happen to strike it big. I agree in principle, although I do like to take advice from investors with skin in the game, and Inner8 doesn't yet connect to real portfolios at all.

Inner8 is well structured, although too technical and complex for the intended audience, in my opinion. Still, if it collects a solid community of users it will reward them with good advice. People who have money in the market have a responsibility to that money to play a more active role in its management than the advice community encourages, so Doyle struck a chord with me when he said, "It genuinely pisses us off, the good money that people are spending on financial advice. And it's not helping." To that end, Inner8 is a good service for the times.

The product will be pitched at the Finovate conference about online financial tools in New York next week. It should be a rockin' good time. A paid version with additional features (I'm predicting portfolio tracking and real-time stock data) is scheduled for 90 days from now.

There is useful and interesting data on the Inner8 stock pages.