Payments Watch

Social finance sites such as Wesabe are not just web based applications that allow users to track spending, but provide personalized advice such as feedback from peers that specifically addresses one’s specific spending and saving patterns. They also provide an interesting opportunity for improving upon, and creating more timely payments studies such as the Federal Reserve’s Retail Payments Research Project.

Wesabe and others such as Buxfer and Geezeo are social finance sites that allow anyone to anonymously upload and tag banking transactions and credit card statements while receiving advice specific to their particular financial situation. If you have ever used Quicken or Microsoft Money, you will understand the basic functionality here: the ability to categorize and track spending from different sources in one place (except on the web, you tag transactions instead of merely categorizing them, while leveraging the social aspects of everyone sharing the same application).

When you think about it, this ability to track spending is really the same thing as the ability to track payments. In previous payments studies, large samples of, for example, cheques, credit card, and ACH transactions were collected from various financial institutions and other relevant sources to ensure some level of statistical confidence. These various transactions are analyzed in detail and what results is a snapshot of the payments landscape for a particular point in time. These studies can be repeated showing trends in the various methods of payment (e.g. the decline in cheque volumes) over time.

Given the large sampling of transactions being collected in the social finance sites, one could in theory continually query these databases to provide near real time statistics on payment trends, for example, comparisons by payment method, average amounts, by type of payee and payer. I spoke with Jason Knight at Wesabe last week. He told me that Wesabe has tracked over $500 Million worth of transactions (sounds like a decent sample size to me), and agrees that the data is there, for example, to differentiate payments by payment method, payee, amount, etc. However, he noted that while the data being collected may well be very valuable for this type of analysis, that is not really what they are all about. As they say on their site:

We’re real people dealing with real money issues. We want to get rid of our credit card debt, are starting to think about college savings for our kids, have a sneaking suspicion that everyone else’s cell phone plan has more minutes for less money, are tired of getting stung by stupid bank and credit card fees, and dream of buying a more environmentally friendly car. We feel like businesses have stockpiles of data on us as consumers and think it would sure be great to have more information on where we spend our money so that we can make better decisions. Alone, that’s a pretty daunting proposition, but together, by pooling our knowledge, we can create an immensely powerful thing.

Source: Wesabe

BTW, Jason is probably one of the most accessible CEO’s I have come across of late. On the Wesabe site, he actually invites visitors to Talk to Jason. How could I resist such an offer…I called him up and sure enough he answered the phone. He spent a lot of time with me, answered all my questions and encouraged me to try out Wesabe (which I did - I will post something on that later!).