Pocketbook interview

Some of the most popular posts to have been published on The Credit Letter are about financial tools that are designed to help individuals and businesses manage their spend. For example, this one about web-based apps has been viewed many thousands of times since being published originally back in 2009. And this post about iPhone money management apps from 2008 has been even more successful. However, there is a problem with many of these apps – they are not designed for use in Australia. Take Mint as an example. This was one of the pioneering personal finance web apps, but it is made in America and although it now has integration with some Canadian banks, it remains primarily designed for the U.S. market. Australians were essentially not given an option.

Pocketbook is a Sydney-based startup that aims to change that. We interviewed Pocketbook’s creators (Alvin Singh and Bosco Tan) about their product and how it can help you. If you haven’t heard about their service, or didn’t even know such tools existed, read on!

Q: Tell us a bit about you guys for people outside the start-up community. How did you end up building PocketBook? What motivated you?

Alvin and I have known each other for 18 years. We met in the first week of year 7 and have gone to high school and university together. We’ve gone away and did different things, Alvin as a systems architect for News Ltd., then at a startup in a CTO role, and myself working in various roles in IT security, management consulting and corporate strategy. Over the years, we’ve always supported each other when it came to different business ideas we were working on as well.

Pocketbook came from a problem Alvin was having with doing his tax return – it was taking him longer and longer to collate and categorise transactions. He created a small little utility to help him to do this and quite quickly it snow-balled into a working and functioning prototype with functions such as auto-categorising and auto-updating transactions. With this, he showed some friends (including me) who loved the prototype and wanted it for ourselves.

What motivated me to join him on the project was because of the idea and the early execution. The problem was universal, and when built out can really solve a lot of problems busy people have when it comes to staying on top of all their spending, in a ridiculously simple way.

That was 5 months ago, today, we’ve built Pocketbook out to include more institutions and more features, including things like bill alerts and predictions, analysis tools and very soon budgeting. We have over 3,000 early beta users of the product.

Q: Briefly, what is PocketBook and who uses? Is it just geeks and heavy web users?

pocketbook.com

Pocketbook is a simple way to approach money management and budgeting. It takes away the tiresome process of regularly monitoring multiple bank accounts, which you do work using spreadsheets and calculators to try and stay on top of your finances.

Pocketbook users are those who want to have an easier time doing the the above. We make it really, really simple to stay on top of everything and get the piece of mind that everything is on track. We see people use it because they have 5 or more credit cards, those with multiple loans with multiple providers, those with sole trader businesses – from students to high net worth individuals to soccer mums. We’re really seeing people from all walks of life.

Q: How come it has taken until 2012/13 for there to be a service like this available in Australia?

Personal finance and budgeting tools have existed forever (Microsoft Money), but the way it’s executed has evolved over time. Until Mint, you had to be really financially literate to use and understand these products (double entry accounting, debts and credits etc.). However, Mint has helped simplify that language for the North American audience and has reduced the effort needed to get some great results.

A few years on, the Australian market is ready for something in personal finance that’s built for the average Joe. And we at Pocketbook think we’re in a great position to nail it.

Q: A service like PocketBook solves a real problem. How do you think it will impact upon the role of financial advisors?

We think from a consumer perspective, the trend is ‘self-service’. We’ve seen the rise of the self-managed Super for instance. Consumers are getting more educated about products (via sites like CreditCardCompare.com.au) and talking more openly about what are the right things to do financially with each other. This actually positions Pocketbook nicely, as it helps aid that learning and ongoing management.

From a financial advisor’s perspective, one of the things that’s evolving is legislation which binds financial advisors in Australia. I believe the laws change in July this year. The new laws do two things. One, it says no longer are financial advisors paid on commission of the product they sell, and two, accountants can start to give financial advice. What this means is the whole reward structure for the financial advisor industry will change. This will mean they will be driven to give more prudent advice to clients, rather than sell a specific product(s).

We welcome this change, as we think established financial planners will start to look at ways to become more efficient. For example, we know currently they spend 30-40% of their time collating financial information their clients subscribe to. We think we can reduce this to next to nothing, and let the advisor get straight to advice. There is also the post financial advisor scenario – once you’ve been to a financial advisor. The tools available for you to keep track and on-top of your finances is rudimentary at this stage – we want to change that.

Q: Some people are naturally cautious when it comes to online financial services, especially when it requires handing over bank passwords to a third party. What about people’s privacy and security?

Security is our highest priority and we’ve spent a great deal of resources to ensure we have built a highly secure system. We protect our user’s data with layers of hardware and software security at a bank-level. We’ve actually had experts who have had years of experience securing networks for Australian banks look at our practices and given their recommendations which we’ve then implemented.

We’re also using Cloudflare as well, a leader in the space which helps to protect us against emerging threats more effectively. Furthermore, the platform is a read-only service, so money can’t be moved around within Pocketbook – we only look at transaction history.

Q: Does PocketBook categorise spending into travel, shopping, groceries etc?

Yes, Pocketbook categorises into a a range of common spending categories. In fact, we also allow individuals to use sub-categories. This means, you can not only label things as travel, but also fine-tune it to travel – accommodation, travel – flight, travel – food etc. All this then can be looked at in depth through our ‘Analyse’ feature, which allows a high-level and detailed break-down.

Q: How many financial ‘relationships’ do people typically have?

From looking at our users, on average they bank with 1.25 institutions and have 4+ accounts across savings, cards and loans. Around 75-80% of people seem to have credit cards. I think that’s pretty representative of most people today.

Q: How important do you think it is for people understand their own lifestyle and spending habits when they look for bank accounts, loans and credit cards?

Understanding spending habits is critical in order to shape your lifestyle. Most people don’t really know how much they spend on entertainment vs. family essentials vs. work or study vs. savings. They may have some rough idea, but they don’t really know for sure.

Even appreciating the ratio between these spending categories, and understanding how lifestyle may change as these ratios get adjusted is key to making financial plans for next week and the next decade.

Q: Just how useful is it to analyse your own financial history?

Analysing financial history is the core thing financial planners ask people to do as a first step in that first consultation. The reason being this is how planners can start to understand one person’s situation from another.

As the old adage goes, there’s no one size fits all solution. And financial situations are very much the same. Take your users for instance. Understanding historical transactions around credit cards can help project what’s a better product for that person’s situation.

One example is if they habitually buy a lot from overseas or is a frequent traveller, then a card with no overseas transaction fees makes a lot of sense. Another example is if the person constantly goes over their credit limit by a certain amount. They might be better with a card that offers a higher credit limit, or applying for a credit limit increase on their existing card..

Q: What are some the things that people can find out from monitoring their personal finances, i.e. surprises, ridiculous fees and interest?

What has surprised a few of our users is how much they’re paying in aggregate for ATM owner’s fees. You know the $2.20 that gets charged every time you use an ATM that doesn’t belong to your specific bank?

I’ll give you a few of our examples. When Alvin built auto-categorise, he actually located a $800 fee the bank had charged him for his home loan, which they promised they wouldn’t. He made a number of calls and finally got this fee reversed. Without Pocketbook pointing this out, he wouldn’t have found this. This is actually the basis of a feature where we send out notifications to our customers when a large bank fee is charged. We also provide them with a bank phone number so they can deal with it then and there.

Another example is realising an unpaid bill that’s been lost in my inbox. The auto-detecting bills feature predicted that I should have had a bill come through, but that the transaction hasn’t showed. This was a timely alert which helped me skip the late fees that I would have been charged, which can be quite high in some cases.

That’s all just a start. I think where we’ll get to is this historical analysis really helping individuals get a handle on budgeting and shaping their feature spending goals based on what they spent on categories historically.

Q: In 2012 we surveyed over 1000 of our users about their opinions towards personal finance and we found that 38% thought that the only budget they needed was in their head (full results are here). How do you hope to convince these people of the need for a written budget?

We actually love this 38%. We ourselves are this 38% to be completely honest. We in the back of our heads know we’re okay, but Pocketbook has shown me that I can do better. And because it’s no effort at all, it’s actually really helpful to have.

The analogy I draw on is, until 5 years ago, I thought knowing trivial facts in my head was enough. But today with Wikipedia, I actually don’t need to know it in my head at all – and I actually ‘know’ more than I use to. We believe by making Pocketbook ridiculously simple, it’s really an extension of this headspace, and not a chore.

Q: How accustomed do you think people are to comparing financial products?

Increasingly, I think people are more willing to find the best value financial product that works for them. I think the whole Rams vs Aussie vs Wizard home loans vs the banks really kicked this off. People were convinced that financial products don’t necessarily need to come from the banks.

I think what we’ve done at Pocketbook is to make owning financial products from various providers easier, as we help to aggregate the various different sets of transaction history. So I really think we complement each other well and you’re really nailing an important need in the market place.

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