You’ve probably heard of MoneyAisle by now from several tech/ business publications and blogs like Netbanker. The service has been up for about a month, and just recently received a further $7 million in funding from several investors. MoneyAisle, owned by NeoSaej, is an online auction site where banks compete to offer the best rate on your CD or high-yield savings account. Essentially, as Edward Woods, a senior analyst at Celent puts it, “It’s Priceline for bank products.”
Obviously, this is great for consumers, but I’d like to concentrate on how helpful it is for small and mid- sized banks. These financial institutions don’t have the advertising budgets to compete with big banks, meaning that they have a harder time reaching consumers outside of their local market. So how does MoneyAisle help? Well, first of all, as Mukesh Chatter (CEO of NeoSaej) puts it, “Our platform is completely seller-neutral – large banks have no advantage over smaller community banks.” The company’s ad-free business model means that banks cannot influence results through advertising. Instead, they compete purely on rates, and MoneyAisle gets a small cut when a bank gains a customer through the auction. Because small and mid- sized banks forgo having to spend on advertising, they can pass along the savings to consumers in the form of higher rates.
State bankers associations, realizing what a boon this could be for their member institutions, have started endorsing MoneyAisle. The Michigan Bankers Association (MBA) recently formed a strategic alliance with MoneyAisle in an effort to introduce more member banks to the MoneyAisle network. It’s a win-win for both organizations – enabling banks to reach more potential customers and enlarging the auction site’s network. It will also be a plus for consumers, since increased competition on the site should lead to better rates for shoppers.
However, I have a couple questions:
1) Are credit unions going to become part of the network? Are there any regulations to restrict this?
2) How willing is a consumer to open a savings account or CD with a small community bank that is located far away and has no physical presence in that consumer’s area? How good does the rate have to be to outweigh this drawback? (obviously this differs person to person.)
3) Can or do online banks compete in MoneyAisle auctions? (Their lower overhead costs often mean better rates on savings accounts.)
{ 2 comments… read them below or add one }
As someone who works on MoneyAisle, I wanted to take some time to answer the questions you posed in your blog:
1) Are credit unions going to become part of the network? Are there any regulations to restrict this?
Because all the banks in our network are Members FDIC, we do not have any credit unions in our network. However, as MoneyAisle grows and expands the types of products
we offer, there is a possibility of adding a credit union network in the future.
2) How willing is a consumer to open a savings account or CD with a small community bank that is located far away and has no physical presence in that consumer’s area? How good does the rate have to be to outweigh this drawback? (obviously this differs person to person.)
As more business, especially banking, is conducted online this is not the obstacle that it would have been even five years ago. As you stated in your question, this differs from person to person, and I imagine there will always be some holdouts who wish to exclusively bank locally, but that number is shrinking. For products like CDs, where you essentially put the money away solely to collect interest in a low-risk manner, I don’t see this being an impediment to most people.
3) Can or do online banks compete in MoneyAisle auctions? (Their lower overhead costs often mean better rates on savings accounts.)
Online banks can absolutely compete in MoneyAisle auctions, provided they are Member FDIC and are either adequately or well-capitalized (this second requirement is to help our users avoid getting stuck in a situation similar to what recently happened to Indymac’s customers.)
Thanks for your interest in our site. If you have any more questions, we’ve got a blog up at http://blog.moneyaisle.com
Kevin Cafferty
Senior Web Producer, neoSaej
Hi Kevin,
Thanks for the prompt response to my MoneyAisle queries. I definitely agree that folks are now less hesitant to bank with financial institutions that don’t have brick and mortar branches in their local area. (As you said, with products like CDs, you essentially put money away and don’t touch it for a while, so it doesn’t really matter.)
How true do you think this sentiment will be if/when MoneyAisle begins to add new products, like checking accounts – which people access much more frequently? Is the company even planning on going there?
A network like MoneyAisle for credit unions would be great. Even better would be an auction site that allows credit unions and banks to compete against each other. I don’t know if this is a possibility in the future. I assume that for the time being, MoneyAisle is going to concentrate on adding new products and enlarging its network of banks.