NEWS

Making a Mint

Forbes
May 5, 2008
By Claire Cain Miller

Aaron Patzer will track your finances and suggest ways to save money--all at no charge. But first you have to get comfortable letting strangers ogle your accounts

What's in your wallet? If you're like most people, a grab bag of bank, insurance and credit cards acquired piecemeal as ads caught your eye and updated randomly. Most Americans are so financially haphazard, in fact, that three in five have never even tried living on a personal budget that tracks their money.

Then there's Aaron Patzer. A numbers freak, he kept his checkbook fastidiously balanced from age 16, when he ran a Web design venture out of his bedroom in Evansville, Ind. Even after Patzer moved to Silicon Valley, he shunned late-night partying and spent hours every Sunday downloading his bank statements via Quicken and then painstakingly categorizing the entries as restaurant tabs, grocery bills and gas station stubs.

Then in 2005 personal disaster struck. Swamped by his job at a software startup, the teetotaling Duke and Princeton grad let 400 transactions go untracked and faced the prospect of spending an entire weekend keying them into his computer. If Patzer couldn't keep up with the budgeting grunt work, a less obsessed consumer wouldn't stand a chance.

So, true to his nature, he quit his job and spent six months living off savings while creating a Web site called Mint. Based in Mountain View, Calif. and funded with a hefty $17 million in venture capital, it offers an online service that sweeps through users' bank, brokerage and credit card accounts and updates the data daily. Launched last September, it claims to have 200,000 users and to be signing up another 10,000 each week.

"People don't want to have to be accountants," says Patzer, 27. "Mint takes the work out of personal finance."

Mint is, in fact, a gold mine for those looking to take the tedium out of budgeting. Users need only key in log-ins for financial institutions--of which the average American uses 11. From there, Mint deciphers the vendors used from the jumbled code on credit card statements. Then it assembles colorful pie charts so users can see cash balances and debts and spot if they're over budget on their pub tab. It's a dramatic streamlining compared with Quicken, the budgeting software giant, which offers the peace of mind of having data reside on the user's computer but can require lots of cross-checking against paper statements and receipts.

Mint e-mails users when bank balances get low, bills are due and suspicious card charges appear. It analyzes spending habits and lists financial-service options, as Orbitz does with flights. Patzer boasts that Mint's recommendations save the average user $1,000 the first year. That may sound highball until you consider that banks pulled in $39 billion from often poorly disclosed "account maintenance" and other fees in 2007.

Days after David Barber signed up on Mint, Citibank pitched him a credit card with 0% interest on balances transferred. The Providence, R.I. TV host moved $2,760 from a Washington Mutual card charging 22% interest and expects to save $600 the first year. "It was free money," he says.

For users Mint is quite literally free, although not free of conflicts of interest. Patzer and his backers hope to make a profit by convincing financial institutions to sponsor their site in exchange for mention on its Ways to Save lists. Mint gets paid only if a customer opens a new account with a sponsor, entitling the site to a $20 to $60 finder's fee. It says 6% of users have signed up for credit cards and 1% for new bank accounts, or about 14,000 in total.

Another way Mint hopes to monetize traffic is by precisely targeting ads based on information it gleans from your financial records. Frequent patrons of Hollywood Video, for example, will receive Netflix coupons. Mint claims 12% to 15% of its ads get clicks, versus 0.2% for standard online banners.

"Shoving the bank brand at people has mixed results, but on Mint, where someone is thinking about organizing their finances, we can be more relevant," says Peter Guagenti of digital ad agency Avenue A Razorfish, whose clients include Mint sponsor ing Direct.

Mint's biggest challenge will be convincing enough people to reveal data to the little-known site before its vc money runs out. "Even if you are gullible enough to entrust your most personal information to that company, how can you be sure some evil-minded hackers don't steal your data?" says a typically skeptical reader on the blog TechCrunch.

Patzer insists that even if hackers break in they can't link account numbers to names. Supporting his claim, a look through Patzer's own account reveals $37,000 in assets and a penchant for In-N-Out Burger, but no account numbers or ways to transfer funds--which also means users must schlep to other sites to pay bills. It doesn't help that giants Bank of America and Quicken separately have started offering online aggregation and budgeting, as have upstarts Wesabe and Geezeo (see table).

"To be truly successful, we have to get millions of users really quickly," says Mark Goines, a Charles Schwab and Intuit alum who invested in Mint. That explains why Patzer will spend most of the $12 million he raised in March on marketing aimed at creating a much larger appetite for Mint.