Hat tip to Wesabe, who are continuing to embrace the blogosphere in a big way. Today, I received early notification of a press release they are putting out tomorrow which announces some interesting analysis they've done using their member data.
For those who aren't following Wesabe, it is a social personal finance site that enables its users to upload transactions from their bank, tag them, and share their thoughts about strategies for managing their money. The result is a very large research data set, which apparently the company has been going through to identify significant trends.
Unsurprisingly, a focus of the announcement is on bank fees. The Wesabe analysis covers the top fee charging banks in the US, with Wachovia coming out on top. Apparently, they charge the lowest fee for overdrafts, but charge it the most times. By contrast, Wells Fargo has the highest fees, but don't seem to charge it as often.
The conclusion drawn in the announcement: Wells Fargo offers better value to customers. In my view, though, that analysis might be simplistic. What if the reason that Wells Fargo charges less often is that the customer demographic of Wells Fargo is simply better at managing their personal finances?
In any event, a focus on fees is not that surprising, since fees are very unpopular with customers, and consequently, good marketing for startups. I've previously commented on this, although I must say that Wesabe is doing a good job at present covering other things that can help their customers as well.
Wesabe also analyzed the satisfaction scores that their users have associated with particular transaction tags. Top satisfaction is expressed with outdoorsy sorts of things like camping and camping equipment. On the other hand, Finance Charges and utility bills top the list of things that customers are dissatisfied with. Actually, when I looked over these lists of satisfied and dissatisfied transactions something was pretty obvious: Wesabe users express high satisfaction for leisure and entertainment transactions, and low satisfaction for bills, fees and other non-discretionary spend. It is no great feat of analysis to expect there to be causality here. Who doesn't after all, hate making their mortgage payments?
In any event, the fact of the matter is that Wesabe is already doing a great job for its customers, and now, if they continue the research trend that they started with this release, they may also be able to drive positive impacts for the industry as a whole. Actually, I would encourage Wesabe to do what Prosper has already done: make its data available for download in aggregate for others to review. Can you imagine the blogosphere analysis that would happen then?
You will find the press release on the Wesabe site here tomorrow, and thanks to Debbie Pfeifer for the early notification.
Hey, James,
Thanks much for the write-up and the great comments.
You're right that the frequency of overdraft fees probably correlates to the target market of the bank. Washington Mutual, second after Wachovia in frequency of overdrafts, advertises "One Free Overdraft a Year" as an account benefit, presumably so that people hit often by overdrafts will be attracted by that allowance.
Our conclusion was not that Wells Fargo offers better value overall, but that it is "a better deal for the majority of our users." Wesabe users are self-selected contributors of data, so that is a limitation on the analysis, and within our user population there are several different kinds of users. You're right that we can do a follow-up analysis of what banks are the best value by *type* of user -- maybe steering frequent overdrafters to one bank versus another for those who rarely incur overdrafts would make sense.
My belief about the value of the current analysis is that it calls into question whether consumers should look at the amount of the fee (on a site like Bankrate.com) as the best way to evaluate fees. We think frequency of charges is also important to consider. Particularly since some banks clear payments before deposits on the same day in order to maximize overdraft fees, you can see our analysis as supporting data for finding banks that you these practices to maximum detriment. (See http://articles.moneycentral.msn.com/Banking/BetterBanking/WhenBanksTurnEvil.aspx for some examples of the problem, including one posted on Wesabe.)
On the categories, you're right that it should be obvious that leisure is pleasing and fees are not! :) What I found interesting in that analysis was that regulated monopolies and oligopolies clustered so strongly at the bottom of the satisfaction list. Competition really does make things better for consumers, and regulation of monopolies doesn't appear to help.
Let me turn the question around: what would you like to know from the Wesabe data? We definitely intend to make aggregate data available to the public, as you suggest, but if there are questions you're interested in, I'd love to hear them.
Thanks again.
Marc Hedlund, Wesabe
Posted by: Marc Hedlund | June 14, 2007 at 09:15 AM
Jay,
Not to pile on, but "simplistic?" ouch! That said, there is nothing like having our work peer reviewed to make it better.
This is the first of many reports, and they will get better over time.
Posted by: jason knight | June 14, 2007 at 09:28 AM
@Jason: I have to say that when I read James' post and saw the word "simplistic", I thought he was really referring to the conclusion and not the analysis itself.
But I think Marc hits the nail on the head by suggesting that the recommendation of best provider be made by type of user.
Without factoring in consumer behavior (ATM activiity, overdraft propensity, average balance, etc.) and service quality/reputation, I don't think that anyone can conclude that one bank is better than the others -- even w/ the caveat "for the majority of our users".
Posted by: Ron Shevlin | June 14, 2007 at 05:14 PM
Ron -- I would agree, *but* for the policies of banks with regards to overdrafts. See particularly this long-running thread on Wesabe, referring to a US Today article on this topic:
https://www.wesabe.com/groups/12/discussions/230
If the bank is stacking the deck against its customers by clearing transactions in the least favorable order, as it would seem Wachovia has been, by 'haberschmidt's and others' reports, then you can't look at the data and put it all on the type of user. The type of bank and the bank's overdraft policies matter too.
Posted by: Marc Hedlund | June 14, 2007 at 05:35 PM
Marc -- I think we're in violent agreement. I was trying -- perhaps not very clearly -- to assert that one has to take into account "supply and demand" factors -- the demand being the "type of customer" and the supply being the "service quality/reputation.
But here's what I have trouble reconciling. If Wachovia has "underperformed" in terms of clearing order and overdraft fee frequency, then why do their customer sat ratings continue to rise?
Please don't misinterpret this question -- it is NOT meant to impugn the Wesabe data. In fact, just the opposite -- it reflects my continued suspicion of the usefulness of cust sat data. Larry Freed, care to comment?
Posted by: Ron Shevlin | June 14, 2007 at 09:28 PM