For the last few years, I have been using Mint (mint.com) to keep track of our household expenses. My needs are very simple. I want to be able to answer simple questions like “How much are we spending on regular monthly expenses?” and “How much is going towards discretionary expenses like eating out?”.
But I find it difficult to answer the simple questions above. It takes a lot of time and effort to get to a point where I can say that I am reasonably close to the real answers to these questions. As I describe the problems that make it so time-consuming, it actually throws light on a new battleground for consumer services – customer data in the hands of customers.
Except for a tiny fraction of cash expenses, all of our expenses are in the form of transactions – debit cards, credit cards, electronic transfers, bill pay transactions, and yes, a few, hand written checks. We try to keep things simple so we don’t have too many accounts. All these accounts are hooked into Mint. Mint pulls all these transactions so that I can see everything in one place. So far so good.
To get a handle on our household expenses, each transaction needs to be categorized correctly into categories like Entertainment or Restaurants.
That’s where the problems start. Every time I log into Mint, I have a whole bunch of transactions that are labeled “Uncategorized”. I then have to manually go through each transaction, try to figure out the merchant to whom I made that payment and then categorize it. Often, the name of the merchant is completely garbled. If my wife made the payment, I have to wait for her to be around so I can ask her. It takes time and is annoying as heck.
It shouldn’t be that difficult to get this right. A typical card transaction is passed from acquirer to network (like Visa) to issuer (my bank or credit card company) and then to Mint. On the way, nobody seems to care enough to categorize the transaction intelligently, and ensure that the merchant name is represented correctly. It’s all left to Mint to do whatever it can with the data it has.
Mint tries. It allows you to categorize recurring expenses automatically. But non-recurring expenses are far too high in our family to ignore. Mint uses very little intelligence to extract the meta data from transactions. A typical transaction would show up on Mint like so
CHECK CRD PURCHASE 02/18 LYFE KITCHEN OF PA PALO ALTO CA 434256XXXXXXXXXX 08304975697XXXX ?MCC=5812 on Feb 19
In this case Mint extracted the merchant name as “Lyfe Kitchen Pa” (correct) and tagged it “Uncategorized” (missed opportunity).
It so happens that the string “MCC=5812” refers to the Visa merchant code for “Eating places and restaurants”. A simple google search will tell you that. Why Mint would choose to leave it Uncategorized is difficult to fathom.
In other cases, while extracting the merchant name it applies no intelligence, it appears. It just pulls out the first two or three words that are not numbers. It typically fails for merchants like 23andMe or 37 Signals or 76, the gas station.
Ultimately, no one in the entire chain of merchant-acquirer-network-issuer/bank, all of who are making money because I am spending, care enough to do anything with my data, except the bare minimum to complete the transaction. They don’t recognize the value that I put in my data. Mint does. Which is why I spend a lot more time on Mint than on my bank account website. But even Mint doesn’t do enough.
Next, consider Simple (simple.com), a new banking service that I started using a few months ago. It is still by invitation only but if you can wangle an invitation, you won’t be disappointed.
This is a screenshot of what I might see on the Simple website. Simple extracts the merchant name quite well. And the automatic expense categorization works quite well. I don’t know how it does it, but I have never had to go in and change the category on a transaction. In fact if I had to, I wouldn’t know how to do it.
But that’s not all. It will put the address on a little embedded google map. That can be a big help in identifying where you were. If you went to a restaurant, it will tell you how much you tipped.
It’s not perfect, but I feel like they are putting the information that they have to the best possible use. To do more, they would have to get more information from upstream sources over which they don’t have much influence.
I have been comparing Simple with Mint which may not be a fair comparison. Simple has to deal with its own transactions (bill pay or their own debit card). Mint aggregates across many different sources of transactions each presumably with its own idiosyncrasies.
But if you were to compare Simple with any other bank that I am aware of, the difference in the use of customer data (and user experience) is vast. It is light years ahead.
Consumer services today offer a lot of choice. One of the most important ways in which consumer services will compete with each other is what they let their customers do with their data. For a long time, the focus of these companies has been on the use of customer data to extract insights for themselves – how to cross sell more, how to identify loyal customers to serve them better and so on. But this is different.
Customer expectations are rapidly changing. They are being shaped by companies like Apple and Amazon.com that set the standards, not just in their industry, but across industries. Customer data is now part of the customer experience. This is the new battleground.
So what are these customer expectations? Here are mine:
1. That my service provider will obtain and share the data with me in a timely fashion.
I’ll illustrate this with an example. Today’s smart meter technology allows my utility to obtain the power consumption at my home in at a resolution of 15 mins. At this resolution, the data can tell me a lot more than what my monthly bill tells me, which is almost nothing, other than the fact that it is high or low. (Currently mine is running too high and I don’t know why!)
But deploying smart meters costs money. Lots, in fact. Will it be worth it? It might have been hard for utilities to justify the cost. After all, they are all monopolies. Luckily, regulators in most advanced nations have been nudging utilities in that direction.
In every industry, there will be similar challenges. How do you justify the cost of gathering more data that is useful to the customer? Expecting new revenue from additional services to justify giving customers more data may be too short-sighted.
2. That my service provider will understand that that data is mine.
I shouldn’t have to pay just to get that data. Although I will gladly pay for a service using that data that is of incremental value. I should be free to take that data out myself, or allow another service provider to pull it out on my behalf.
Today, my bank charges me a fee if I want to see a used check image older than 6 months. Tax filing time must be quite profitable for the bank. I don’t have a problem with the bank trying to turn a profit. But not on my data. If your storage costs are too high (really?) allow me to easily export it to my Evernote or DropBox account. (New feature idea – managing check images!)
3. That my service provider will take the utmost care to secure my data
This is generally well understood. Because of laws and the damage that negative publicity around loss of customer data can do, most services try hard to protect it. Try harder! Lately, the hackers seem to be winning.
4. That my service provider will add value to the data
My online brokerage service has always given me a CSV download of my transactions. But till two years ago, they did not have a decent performance analysis of my investment portfolio. So I had to go and put my entire portfolio in a Google spreadsheet which would look up prices from Google Finance and calculate the rate of return. But with reinvested dividends and what not, it took a lot of work to keep the portfolio up-to-date. How you can be an online brokerage and not offer the most basic use of my data – portfolio performance – is beyond me?
Performance analysis, alerts, suggestions – they are all possible. And expected. If my credit card hits me with a foreign transaction fee, I want to know about that in an alert (thank you Mint!).
5. That my service provider will understand that the reward is mostly my loyalty
There was a time, when online retailers did not give you a transaction history. I stopped shopping on those sites. I don’t want to spend the time to search for the same item all over again, if I want to buy another one.
For service providers, this is going to become the cost of doing business. So if you think that you will invest in giving me more value from my data only if I pay you more for this value, your competitors who think differently will get my business.
But, if you are clever about it, you will discover value points that I will pay for. You see, the work that you do to help me get more value from my customer data, in turn helps you understand me better. And when you understand me better, you will be able to design services that I will want to pay for.