If I were to do a new company...

June 02, 2006

… I would do a personal finance one. A “web2.0”, “getting real” type of no-nonsense service where I could do exactly two things.

• Track and record daily expenses.
• View reports off those expenses over longer periods.

I’m amazed that with all the fuzz around “web 2.0”, people are inventing all sorts of crazy, stupid and mostly useless things about “social networking” and all sorts of content readers and aggregators but no one is really cashing in where the cash (literally) is. If the above was done properly, I’d be among the first to sign up. Let me know if your product does this, or if it’s not available yet, let me know when it’s done.

Well yeah, there are some “innovative” things around web vs finance announced recently. There was a “social wallet” type of service (damn, can’t recall it atm) where you could split restaurant bills and pay them easily to each other with mobiles. PayPal recently announced PayPal Mobile. All these are totally nice but beside the point here. They’re about transaction management, but I don’t want that. I already got my Internet banks, mobile payments, PayPal accounts and all those set up and working nicely for me. What I want is to simply track the expenses, not perform the actual transactions.

I’ve done personal expense management in Excel for years. I basically have just categories and then track expenses in them and do a bit of monthly summaries. I’m a bit cash-freak and do it for both accounts and pure cash in my wallet – a couple of times a week, I add up all accounts and see if the cash amount that Excel tells me and what’s in my pocket actually match. (They mostly do.) It’s recently gotten boring to figure it out and I’d appreciate to have a hand and a bit of templates and know-how about how to structure and develop the thing properly.

Some people are really disorganized with their finances and would appreciate this kind of thing a lot. It would almost train them to live their life properly, by giving them a no-nonsense overview of what happens in their wallets and bank accounts, and helping them steer it a bit. It could also pick up trends and perhaps get you back on the right track. “Hey, I notice last month you spent three times as much on alcohol as you do usually… are you sure you’re fine?” Maybe this is a bit over the top, but it’s certainly a fact that keeping your finances organized helps you live a happier life.

I’ve tried to look into who offers this kind of software, product, service or however you want to position it. Maybe my “studies” are incomplete, but basically I understand there are just MS Money and Quicken, and then a bunch of other niche ones which are usually just silly Excel macros. I wouldn’t really trust those niche ones so I just looked at the “packages”. A disclaimer here is that I haven’t really used any of these, I’ve just looked at the product literature and the websites.

For me, the problems of buying personal expense tracking as shrink-wrapped package (and conversely, the selling points of buying it as an online service) are as follows.

• they rely on local data. So data just sits on your computer. The import-export capability isn’t that great. If your computer dies on you, you’re screwed. There’s no secure online storage. How about if I need to track my stuff being away from the computer?
• they contain all sorts of stuff you don’t need. In short, bloat. They sell you tax advice, they boast that they are able to integrate with all sorts of other software that calculates your taxes. I’m sorry Americans and Western Europeans that you live in a country where you need special software to figure out your taxes. I don’t, so it’s not my problem so all this tax thing is kinda useless. Tax calculation and expense tracking are two separate problems. While they may be connected at a later stage, it doesn’t need to be an integral part of the offering. Similarly, I don’t need portfolio and investment advice. MAYBE one thing I could use is integration with my bank.
• they are limited to one market/currency. Guess what – some people need more than just the dollar (or euro, for that matter). Especially many new developing economies aren’t joining any of these anytime soon, but are full of people who could make use of such a service in their own currency. Or if you’re jumping between cash and bank accounts in multiple currencies, would be cool to keep track of it all.
• they just feel bulky. This goes back to the first bullet. Why do you force me to choose if I need Basic, Deluxe or Premier version of your thing? I’m sure you have many users who can immensely boast their self-esteem from purchasing a “higher-tier” version of your thing. That’s not me. I just want it to do its thing for me.

An argument which you could make about why it is difficult to offer financial services as a startup is that “people wouldn’t trust you, they only trust their banks with finances”. On one hand, this has some truth to it. I wouldn’t trust a startup with anything, were it financial or not. If a bank offered this as part of their brand/online service, they would of course get the business from their own customers, but if I’m the customer of another bank and I don’t want to walk up to their office to meet with all their KYC (Know Your Customer) requirements and open an account there (maybe because I’m on another continent), then I’d be out of luck and they’d be out of business. Perhaps any of the banks can start do this as some new “online services” initiative – under their own brand, but not requiring you to open an account or become the bank customer in the strictest sense?

On the other hand, all of the great services we currently trust their money and credit card numbers with had to start somewhere. So if you start building a brand and set long-term goals and don’t mess with people, they’ll eventually see you’re good and trust you, and it won’t be a problem you once were a startup.