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Making a Mint on personal finances

Tax season, belt tightening drive consumers to the Web to manage spending.

Jessica Shambora, reporter
March 2, 2009: 1:20 PM ET

NEW YORK (Fortune) -- Move over, Microsoft Money and Quicken. As tax season approaches, and the new realities of life in recession set in, consumers increasingly are turning to free, Web-based personal finance tools to manage their money.

The leading online site is Mint.com, a Mountain View, Calif.-based company that boasts about 900,000 users. (Rivals include Wesabe, Geezeo, and Thrive.) Launched in September 2007 with backing from venture firms Benchmark Capital, Shasta Ventures and First Round Capital, Mint seems poised to capture even more users as Americans look for ways to take control of their pocketbooks ­ without spending money on personal-finance software or hiring a financial adviser.

Mint is the brainchild of Aaron Patzer, who founded the company when he was just 25 years old. Patzer was frustrated by the manual entry system of Intuit's Quicken, which he had been using for his Internet marketing business. He decided that the other leading personal finance program, Microsoft Money, wasnąt much better. So Patzer worked round the clock, programming the initial version of Mint with the goal of "making personal finance easy and effortless." (For Patzer's tips on how to manage money in a downturn, see "4 Tips for Saving Money.")

Mint's secret weapon is its ability to automatically retrieve a user's bank and credit-card data and instantly spit out lists, graphs and pie chart tracking income and expenditures. It can also send mobile and email alerts and reminders about bills, balances and suspicious activity.

Other financial sites offer similar functionality but lack two features that really set Mint apart. The first is a patented algorithm that automatically categorizes transactions imported from users' accounts, reducing the need for manual data entry.

The second is a search algorithm that finds ways to save users money, suggesting a savings account with a higher interest rate or a credit card that offers better rewards. Some of the customized offers listed come from Mint's partners, including brokerages, banks and all the major credit card issuers. Sponsors get branding and a link for users to apply directly from Mint. In exchange, Mint gets a referral fee for customers it refers -- its main source of revenue.

Patzer says 7% of users have made changes based on Mint's recommendations, and the site has identified over $100 million in potential savings for users. Mint is not yet profitable but revenue is doubling quarter over quarter. "The financial crisis has been very good for us," Patzer said. "We have tripled our user sign-up rate since it hit in August." That's 3,000 new users every day.

The dour economy appears to have been good for competitor Quicken Online as well, which has 700,000 users and is gaining ground, adding 45,000 new users a week. Quicken, which introduced its product two months after Mint's launch, boasts a budget forecasting function and has the advantage being the established brand. But it's also marred by a stigma of stodginess, which might prohibit it from being perceived as the best company to lead personal finance into the Internet era.

Also, unlike Mint, Quicken online hasn't figured out how to make money yet.

"We're focused on building the best possible customer experience," says Scott Gulbransen, an Intuit spokesman. "We'll worry about monetization later."

Indeed, Quicken Online could be a loss leader for Intuit, serving as a gateway to its broader suite of software and other personal-finance products, such as its Turbo Tax software, which helps consumers compile and file taxes electronically.

Despite the presence of other startups hawking online personal finance services, the battle seems to be shaping up to be Mint v. Quicken. Intuit recently sent a letter to the startup, asking its executives to substantiate its user numbers and growth, and Mint complied.

But Mint's Patzer seems to have a bigger target in mind: users of online banking, who collectively number 80 million in the U.S. Patzer also wants to help consumers manage other forms of currency, such as frequent-flier miles and unused cell-phone minutes.

If Patzer succeeds, consumers won't have any excuse letting their frequent-flier miles expire ­ and they certainly won't have any good reasons for blowing their household budgets. To top of page


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