Web 2.0 and Personal Finance: Why I’m Not Using Yodlee, Mint, or Wesabe – Yet

I get contacted quite regularly by groups who are creating Web 2.0 personal finance applications, and I’ve taken test drives of a lot of them. I’ve even been asked to advise on a few that are in the pipeline. If you’d like to sample a few, I’ve linked to a few of the best ones at the bottom.

What are they? These tools are basically online versions of Quicken. They allow you to aggregate all of your personal finance data in one place so you can get a clear picture of how you’re doing. Most of them have very slick user interfaces, too. Even better, they allow you to share some aspects of the data so you can compare goals with other users.

Yet, even though the features of many of them are amazing and I can easily see the usefulness of them, I haven’t yet reviewed any of them in detail, nor do I plan to.

Why not? All of these systems have one key issue that concerns me: personal security. I’m not talking about whether your data is safe from hackers. What concerns me is trusting my key personal finance information to a Silicon Valley startup company. Almost all of these products come from relatively small, non-public startups that are currently running on venture capital money.

To me, this is a giant red flag waving around in the sky. I watched an awful lot of dot-coms blow up in 2001 and their data went away to … who knows where. Where will the data go if these companies go under? Will the owners dispose of that data ethically? Will they sell it? Most of them have privacy disclaimers, but a legal document doesn’t really help if your bank login information and your credit card data is floating around on a laptop in Armenia.

The one key piece that these organizations forget is that your personal information and logins are extremely valuable. Your logins provide access to your money and your personal data, and if these logins fall into the wrong hands, bad things can potentially happen – lost funds, identity theft, and so on.

The best solution to this is to minimize the number of places that have your key personal data. I trust my banks and my credit card holders – and that’s pretty much it. The fewer places that my personal data resides, the better.

This sounds like an indictment of these tools, but it’s not – they have a lot of potential. But that potential lies with integration with the banks themselves, like ING or HSBC. Make it so that the access to your accounts lie with the bank itself, the entity that already has your information, and the risk to personal data issues is reduced. These tools shouldn’t be a separate entity from these institutions, but integrated into their online interface.

In other words, Mint et. al. should evolve to be the front end for online banking services. I like the ING Direct interface (after all, it’s my primary bank), but if that site had the interface of Mint, with all of the interesting tools and such and was already within the secure environment of a bank that already had my data, I’d feel far more secure about trying out such a tool.

In the future, I hope to jump into such a tool head first – my enthusiasm would know no limits. But the security issues keep me from signing up with this first generation of Web 2.0 personal finance tools.

Want to see what I’m talking about? Here are three of the best Web 2.0 online personal finance tools. I recommend looking at them, but I don’t recommend giving them any personal information.

Mint is the “hot” one at the moment, having recently won the TechCrunch 40 “contest.” I also think their user interface has the most potential if used in the ways I describe above.
Wesabe is probably the most personable of the lot – the CEO will directly answer your questions. I also think their security model is the best of those out there right now, but it still makes me nervous.
Yodlee is the most established of the group, but the interface isn’t nearly as slick.

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