This month's Fast Company has an excellent overview article on Mint, the online personal financial management (PFM) tool. In an earlier post, we discussed the "why" behind the introduction of PFM tools, such as Mint, over the past two years. Now let's discuss the the danger brick and mortar retail banks face from an upstart like Mint.
Brick and mortar retail banks, such as Bank of America or Suntrust, actively push customers to use their online banking offerings. The economics are staggering - below is a graph taken from a study conducted by Suntrust, CheckFree and Aspen Analytics on the impact of online banking usage. Although the focus of their study was to assess the profitability of heavy e-bill users, if you look further along the graph, you'll notice the disparity in profitability and bank product consumption between online versus offline bank customers. Online customers had a median profitability score of 140, whereas offline customers had a median profitability score of 68.
It becomes more interesting as you move up the graph to the "Bill Pay Only" and "E-Bill" customer segments. These have higher profitability and product consumption scores.
So what does this have to do with Mint? Two words - account portability. We at Enablus have discovered through our own research that customers which use a bank's online banking tools, online bill pay, and e-bill services are loathe to change brands due to the switching costs and overhead with porting your account. What are these "switching costs?" They represent the amount of time a customer spends to re-enter their payees in the bank's online bill pay service and the security integration/categorization rules between the bank's transaction downloads and the user's desktop PFM (e.g., Quicken or MS-Money). You may have had a disappointing experience at your local Wells Fargo branch, but you'll have second thoughts about switching to a competitor once you realize the overhead and time commitment to re-key this info into a different online banking tool from, say, WaMu. In other words, the greater your reliance on your bank's online tools, the more tolerant (uh...."held captive") you become to any negative customer experience issues.
Mint's threat to retail banking lies in unshackling the customer from the switching costs of moving from one bank brand to another. Powering Mint's back-end account aggregation is Yodlee, the same technology used by BofA, Fidelity and other leading brands. If I can use Mint to perform the same functionality and security found with BofA's online banking suite, then I won't settle for the frosty reception I may have received from a local branch agent.
Alas, currently Mint offers only account aggregation and reporting. Their full potential (and threat to banking) won't be realized until they can offer free bill pay and e-bill services. Until then, retail banks have been given a temporary respite in the customer churn wars.
