NEWS

Mint's Fresh Take on Personal Finance

BusinessWeek
April 18, 2008
by Aaron Ricadela

Gen Y is flocking to a free site for managing bank and credit accounts and household budgets. Mint.com aims for 1 million users by yearend
In the market for personal finance software, bigger has usually meant better. For years, category leader Intuit (INTU) has been churning out new versions of its popular Quicken package, which lets users manage their bank accounts, investments, and small businesses with greater precision. Now, a free Web site called Mint.com has captured a slice of the market with a different formula.

Mint has drawn more than 200,000 users since the site went live last September, offering free and easy integration with personal bank accounts with an emphasis on managing a household budget. Where for $50 or more Quicken and Microsoft (MSFT) Money offer sophisticated tools to manage portfolios or plan for taxes and retirement, Mint aims for users in their 20s and 30s who merely want to keep their bank balances in the black. "Quicken and Money are for bookkeeping enthusiasts," says Mint's 27-year-old founder, Aaron Patzer.

Patzer says he built Mint for younger customers for whom "personal finance isn't their top hobby." The company claims its software automatically drops 85% of bank and credit-card transactions into categories, and can quickly show users where they're spending too much—too many Starbucks (SBUX) runs or shoe purchases, for example. "With Mint, you know you only have a couple of problem categories," says Patzer. Rivals, he says, "just don't do a great job of showing you, 'Where does it all go?'"

Young Idea

Mint's popularity—Patzer claims he's adding 10,000 users a week—threatens to upset the status quo in a market where Quicken dominates with about 15 million users and Money ranks second with 4 million. The site's arrival came just months before Intuit, which sells about $100 million of Quicken software each year, launched a Web version of the application in January. Intuit expects that Quicken Online can surpass sales of its desktop software within a few years. Intuit Senior Vice-President Rick Jensen points out that online versions of the company's TurboTax product eclipsed sales of desktop versions within five years.

Yet the competition between Mint.com and Quicken Online might not be as fierce as one might expect. Many of Quicken's users are baby boomers and seniors, says Cathy Graeber, an analyst at Forrester Research (FORR), whereas Mint.com and other Gen Y-oriented sites are attracting new users. However, Mint could lose its edge with the young crowd as banks make their Web sites easier to use, she says.

Patzer built Mint two years ago in a marathon coding session that lasted 14 hours a day for six months. He nabbed initial funding for the site from First Round Capital's Josh Kopelman after showing him a demo at a Silicon Valley networking event. On Mar. 5, Mint announced $12 million in new funding led by Benchmark Capital. All told, the company has raised $17.5 million from Benchmark, First Round, and Shasta Ventures, as well as angel investors Ram Shriram, Ron Conway, and Mark Goines, a former Intuit executive.

Despite the vote of confidence, Mint will need to prove it won't undermine the trust of customers with a business model that may not charge for using the site, but collects referral fees for successfully steering users to ostensibly money-saving services from partners. Mint says it calculates whether a partner's service might save a user $50 or more per year, and if the answer is yes, displays an ad for that product.

Bold Predictions

Most of these partner services are financial, such as accounts and credit cards from the likes of JPMorgan Chase (JPM), Bank of America (BAC), and American Express (AXP). But the site might also display a bundled service promotion from a phone or cable company if it observes from a customer's bank transactions that the user is paying separate bills for phone, cable TV, and Internet service. Mint says its users click on more than 12% of such ads to learn more—a response rate above the norm for online ads. "It's not like we're bombarding you with useless advertisements," says Patzer. "Our goal is to be that trusted financial adviser."

Intuit counters that Mint's sales of other companies' financial products could compromise the value of its software's advice, and that the $36-a-year fee for Quicken Online is a small price to pay for an ad-free site. "We're invested only in your success financially," says group product manager Jim Del Favero.

Comments like those won't deter Mint from making bold predictions. The company says it hopes to sign up 1 million users by the end of 2008, driven by promotions like the one announced Apr. 3 with The Motley Fool, which will feature a log-in box for Mint on its investment advice site. Patzer's challenge will be to avoid undermining Mint's simplicity as he adds features such as a new tool for customers to track their investments against market indices, set to appear by May. "We're still very early on in this online product category," says Forrester's Graeber. "The jury's still out whether consumers will go to third-party sites, or right to their banks' software."

Ricadela is a writer for BusinessWeek.com in Silicon Valley .

Aaron Patzer, 27
Companies: Mint.com

Funding: $17.5 million from Benchmark Capital, Shasta Ventures, First Round Capital, and angels Ram Shriram, Ron Conway and former Intuit (INTU) executive Mark Goines

For six months, Patzer holed up alone in a room for 100 hours a week to write the code he hoped would result in a smarter alternative to Intuit's Quicken. Two years on, he's distributing the resulting product free through a startup named Mint.com, which has amassed more than 200,000 users—and is adding 10,000 new ones a week. Fans say it's easier to use and does a better job categorizing expenses and flagging problem spending than competing software from Intuit and Microsoft (MSFT). "Quicken and [Microsoft's] Money are for bookkeeping enthusiasts," Patzer says. In March, he raised $12 million, led by Benchmark, to help bring Mint's message of simplicity to the masses.

Advice: "Recessions are great because they unlock the best people," Patzer says. "If you're well capitalized and can survive through the recession, it's the best time to grow. You'll have more access to more talent at a better price than you'll ever have."