Some Lessons Learned From The Rise & Fall Of Wesabe
SAN FRANCISCO-Launched in 2005 as a pioneer in online personal financial management tools, Wesabe, Inc. soon rose to prominence. The service allowed consumers to pull in transaction data from multiple financial institutions and compare their spending to that of their peers, through software and discussion groups it hosted.
Now, the company is offering lessons stemming from its demise, after the company quickly faced competition from household names such Intuit Inc. to upstarts such as Mint Software Inc. Yet, as American Banker, an affiliate of Credit Union Journal reported, Wesabe does not blame its failure on its competitors.
This story is "what Wesabe did to shoot itself in the foot," said Marc Hedlund, Wesabe's second and final chief executive, in an interview. "It was our market to lose and to whatever extent that we lost ... we did it to ourselves."
Wesabe approached its audience delicately-in hindsight, too delicately, Hedlund said. Phishing was a common menace in headlines when Wesabe launched, and banks were extremely vocal about how important it was for consumers to never share their passwords and their transaction data with a third party.
"When I would go around and talk to people about the idea of Wesabe before we started the company, everyone-I mean 90%-plus of everybody-told me that they would never in a million years use a startup website that asked them for their bank passwords," Hedlund said. "That it was just a ridiculous, laughable idea."
Wesabe's first mistake was taking this advice, noted American Banker.
Companies should avoid being "too attentive to what the audience says it wants," he said. "That's how you get bad movies."
The easiest thing Wesabe could have done from the beginning was to partner with Yodlee Inc., a company that already worked with banks to pull transaction data after receiving consumers' passwords.
Wesabe chose not to do things Yodlee's way. Instead, Wesabe devised its own system with a more cumbersome process for pulling in bank data.
Wesabe required users to download transaction data from their bank sites in a file and then upload that file to Wesabe's site. It attempted to make this process easier with browser add-ons that could automate the process, but it still required the consumer to do more work than Yodlee required.
In 2007, Mint launched a competing service using Yodlee's technology. Other rivals used a similar system from CashEdge Inc.
Hedlund told American Banker he does not believe that Wesabe needed technology from a Yodlee or a CashEdge to succeed, but his company should have better prepared for the prospect of competing with them.
"We should have known that somebody would go with Yodlee and we should have aimed to that as what we needed to achieve, either by going with Yodlee or by replacing them," Hedlund said.
Ultimately, in 2008, Wesabe caved to the demands of its audience and began accepting their passwords to simplify the process of pulling data into its system.
'The Elephant In The Room'
This was not enough by itself to even the playing field. After Wesabe began accepting passwords, "we didn't significantly see rates of sign-up change," Hedlund said.
Instead of trying to balance the companies' technical approaches to security, Hedlund said he could have paid more attention to their rhetorical approaches. Wesabe's rivals "really made every effort to reduce the security story to a couple of icons on the bottom of the screen," Hedlund said, whereas Wesabe treated security as "the elephant in the room."
Despite the attention Wesabe's failure has received, it was not the only PFM provider to shut down. Rudder Inc., which launched in 2008 with a focus on viewing transaction data over e-mail, shut down and wiped its servers in early November.
Even Intuit's homegrown effort, Quicken Online, did not last. Intuit made the early mistake of charging for access, and it was virtually alone in this approach. Though Intuit dropped the fee after only 10 months, the damage was done-it began to phase the service out after its 2009 acquisition of Mint, and eliminated Quicken Online this year.
The one revenue stream that Wesabe steadfastly refused to consider was hosting ads on its website. Mint and other competitors such as Geezeo Inc. and Strands Inc. placed ads within their PFM sites and/or recommended new bank accounts.