MoneyAisle is betting that today’s consumers consider interest rates above almost all other factors when deciding where to park their money, including personal interaction.
Launched about two months ago, the online service works by asking consumers to choose a CD or a savings account, enter an amount and the user’s home state. MoneyAisle then puts that request out to bid among participating banks.
The bidding begins immediately and is done in real time. MoneyAisle aims to level the playing field between smaller and larger banks by giving all the chance to bid for business nationwide; it also hopes to draw consumers who are rate sensitive and less willing to navigate search engines to find the best rate.
The process, which usually takes a few minutes, can go through several auction rounds and is repeated as many times as necessary until one bank is left. Each auction round pushes the rate higher.
Consumers watch the auction live and see the number of rounds, the number of bids and the increasingly higher rates appear in real time. Ties are broken on a random basis.
For now, the auction only supports high-yield accounts and CDs, but plans are to offer lending products within the next couple of months.
Mukesh Chatter, president and CEO of Neoseaj, the Burlington, Mass.-based firm that produces MoneyAisle, says the primary difference between MoneyAisle and other online rate aggregators is the lack of advertising and a streamlined IT infrastructure that further cuts costs. “We are completely transparent. We are not beholden to any specific bank,” he says
MoneyAisle doesn’t accept ads from banks, nor does it charge banks for lead generation. Chatter says that by forgoing the lead generation fees charged by many rate aggregators, which can range from $6 to $14 per lead, it’s less costly for banks to grow deposits, and those savings give institutions the opportunity to offer better interest rates to their consumers.
Chatter wouldn’t disclose names of participating banks, but says about 110 have signed up so far. Banks pay $2,995 to sign up and pay a hosting fee to participate in MoneyAisle auctions. That covers licensing for software. Banks pay fees for completed transactions only—a flat fee for high-yield savings accounts and 0.03 percent of the CD amount. Chatter says the service operates on an ASP model; banks connect with MoneyAisle via a Web interface that eliminates most maintenance, infrastructure and hardware costs for both the bank and MoneyAisle.
Edward Woods, a Portland, OR-based senior analyst for Celent, says another difference between MoneyAisle and many other rate aggregators is its speed. “Others on the lending side require you to put in your information, then someone looks at it and contacts you later. I think you get some drop off doing it that way,” he says.
MoneyAisle is a quasi-competitor to LendingTree, though Forrester analyst Brad Strothkamp says the models are a bit different since LendingTree prescreens consumers before the auction process. He says it’s still too early to tell if MoneyAisle’s model will find traction, particularly since many people still apply or sign up for major financial products in person at a branch. “The 2007 numbers show that less than a quarter of consumers that applied for a financial product did so online,” he says.
Celent’s Woods adds that MoneyAisle represents the continued growth of options beyond traditional banks for financial products. But there’s also a tradeoff: virtually no personalized service, which could pose a challenge for the auction. “By saying ‘boom, here’s the best offer,’ it depersonalizes the banking relationship, and underscores the commoditization that we’re stepping into,” he says. (c) 2008 U.S. Banker and SourceMedia, Inc. All Rights Reserved. http://www.us-banker.com http://www.sourcemedia.com
