Finland’s Holvi is trying to change that. The company’s services are aimed at teams that want to quickly set up a new project (Holvi is powering ticket sales for the Slush conference in Helsinki, for example). Users can set up shared accounts and start receiving payments within minutes, and team members can collaboratively manage budgets. You can even set up an account for each of the team’s activities, and accounts can effectively act as storefronts for selling goods online.

And, in that Finnish spirit of openness, you can choose to show your account details to the world at large. In recent municipal elections, some politicians did just that with their campaign funding accounts, in a bid to demonstrate transparency.

It’s a pretty bold idea, and the company has just pulled in a new round of investment. The amount isn’t being disclosed, but one of the investors is Podio’s Thomas Madsen-Mygdal, who is now also on the Holvi board.

“I’ve been tracking the team for a long time, and in the end I couldn’t help myself,” Madsen-Mygdal told me. “I think the need for something to happen in this space is so big right now. An online bank is still the same as it was 20 years ago with telephone banking, and Holvi is fundamentally trying to change what it is.”

The investment is intended to drive Holvi’s internationalization. The firm is already up and running in Finland – getting there meant dealing with the country’s financial services regulator, of course, but it also gave Holvi the authorization it needs to go live across the European Union.

According to Madsen-Mygdal, that’s going to happen around the middle of next year. It’s a simpler task than it may at first appear, as Holvi is in reality a layer on top of more traditional accounts – all the company really needs to do is find banks to partner up with in each new territory.

And beyond Europe? Madsen-Mygdal says that’s “the vision”, but Holvi’s taking things one step at a time. After all, outside the EU, the company will need to engage with the financial services regulators of each new country it enters.

The regulators’ first question, obviously, is around the potential of using Holvi for money-laundering. However, the company says it avoids that – it may be pretty frictionless setting up a Holvi account and receiving funds, but users have to go through the same authorization procedures that would accompany the establishment of a normal online banking account if they want to pay out funds.

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If you’re not familiar with ZestFinance, here’s how it works: The company takes data from approximately 70,000 sources in order to produce a score — similar to a traditional credit score — that determines the relative risk of issuing a loan to any given individual. By considering so many variables, ZestFinance says it can give a more-accurate assessment than traditional underwriters that consider between 10 and 20 variables, meaning lenders that use ZestFinance’s model can offer better repayment terms because they’re confident they’ll be repaid. ZestFinance claims its original model was 40 percent more accurate than the current “best-in-class industry score” and has increased net repayment by 90 percent over those models.

“Because no individual signal is overwhelmingly powerful,” Merrill explained to me during a recent call, “we’re not tripped by one of the variables being bad.”

However, that first-generation model (which the company dubbed “Hollerith” after famous statistician Herman Hollerith) was limited in that it relied very heavily on machine learning in order to discern relationships between the variables it analyzed. Hence “Hilbert,” ZestFinance’s latest model (named after statistician David Hilbert) that the company claims ups its accuracy rate to 54 percent higher than the industry standard. It’s able to achieve this improvement by retrofitting its machine-learning algorithms with good, old-fashioned human input — something Merrill refers to as “human artistry.”

“The combination of really big data and human artistry is the underlying value of Hilbert,” he said.

That’s because although machines are great at finding relationships and patterns, they’re not too great at putting them in context or pruning extraneous knowledge. For example, Merrill explained, we can teach a machine to learn whether it’s raining or snowing based on temperature, but a lot of what it learns is ultimately pointless. So, while the machine would learn that -1 degrees is colder than zero degrees and that there’s not much difference between 50 and 51 degrees, all it really needs to know is whether it’s below or above 32 degrees. (This is why companies like Gravity Labs, for example, also apply human judgment to machine learning systems to form more-accurate interest graphs.)

Merrill speaking at Structure: Data.

One way to think about how the addition of human insights apply to banking is to consider the issue of bankruptcy. Now that Hilbert understands that U.S. citizens can only file for Chapter 7 bankruptcy once every seven years, Merrill said, the model is able to determine that someone who last filed nine years ago might be a better credit risk than someone who just filed two years ago.

Or consider the number of mobile phone numbers a credit applicant has had in the past few years. Whereas that number alone is a relatively weak signal, Merrill said it becomes a lot clearer when viewed in the context of how many addresses someone has had. Five numbers in five years at the same address might mean someone keeps defaulting on their prepaid phone contracts and buying new phones, but five numbers in five years at different addresses might mean someone was just trying to keep a local number wherever they moved.

All told, about 25 percent of the variables Hilbert analyzes are the result of human intervention — but he’s quick to point out that humans are not fit to run the show when it comes to such large datasets and complex algorithms. The artistry must be cast on the math. ”What’s interesting is none of these things could be solved by humans alone,” he said. ” … Humans drown in a 70,000-variable list.”

Feature image courtesy of Shutterstock user  Danti.

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On Thursday, the New York-based startup said that its app, which includes a money management platform as well as finance-related articles, is ready for download in Apple’s App store.

From the passcode-protected app, users can log into a pre-existing account or easily set up a new account that connects with credit cards and bank accounts to track spending, manage transactions and view their overall financial position and progress toward goals.

The service automatically labels some purchases made by credit card and check (into folders for “health,” “utilities,” etc.) but from the mobile app, users can quickly add and label cash transactions to help with budgeting. Users can also categorize the transactions that LearnVest was not able to automatically sort and re-label incorrectly categorized transactions. Over time, the platform learns and labels similar future purchases accordingly.

The millions of people who already use Mint  to manage their finances may already feel like their needs are met, but LearnVest’s bet is that by combining a comprehensive, colorful and cleanly-designed online money management platform with an offline network of available Certified Financial Planners it can not only compete with Mint but with the larger financial planning industry.

Last month, in addition to updating its platform and rolling out a suite of new CFP packages, the company announced that it had become an SEC-Registered Investment Advisor (RIA).

It’s all part of CEO and founder Alexa von Tobel’s goal of making financial planning a consumer product, not a luxury. As she has told me previously, “Making a financial plan should be like getting a gym membership.”

Since launching in 2009, LearnVest has raised $24.5 million and, as of last month, said it receives about 800,0000 unique visitors each month and has quadrupled the number of using its money management center.

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On Thursday, the New York Times reported on the company’s pivot in business model; I followed up with a post about whether it will be able to keep its claim of moral superiority now that it’s essentially selling its methods to third parties that might not have been inspired by the same noble vision to get into the lending business. What neither post detailed was how ZestFinance’s new business might actually work to help reduce the approximately $8 billion extra (Merrill’s number, which seems to take into account total revenue rather than just rollover fees) Americans paid to payday lenders last year.

ZestFinance is no altruist– it’s a business designed to turn a profit, after all — but Merrill appears to believe steadfastly it’s on the right side of the ethical line. If it can take even 10 percent off the cost of payday loans, he said, that’s an annual savings of up to $800 million for borrowers, which is hardly chump change. “We’re not shooting for infield singles,” Merrill said, “we’re shooting for homeruns.”

Big banks are the key

Outsourcing its lending model to online companies such as Spotloan is one way to spread its data-driven underwriting model, but ZestFinance’s real democratizing effect might come from its pending partnerships with large banks and credit card companies. “The market won’t really be transformed until the big providers come back into it,” Merrill said, and ZestFinance provides a means for them to do that.

What’s interesting, Merrill explained, is that payday lenders require borrowers to have a checking account, which means they’re already tied into the larger banking system. Traditional banks have payday borrowers as potential loan customers, but banks often deal in larger loans (versus the $1,000 cap from Spotloan), and their reliance on traditional credit scores to assess risk means they generally won’t borrow to individuals with poor credit. What banks need is a way — like ZestFinance — to assess good credit risks who just happen to have bad credit, so they can create new products to serve them.

“[If I'm a bank],” Merrill explained, “I don’t have to find those customers, I just have to serve them better.”

For credit card companies, which already have products aimed at individuals with lower credit scores, Merrill said the challenge is finding a way to increase their approval rates without taking on undue risk. There, he said, he expects a situation like what happened when ZestFinance co-founder Shawn Budde was at Capital One and the company came into the subprime credit-card market with lower APRs, forcing the rest of the industry to follow suit. Credit cards might never be the cheapest means of credit, Merrill acknowledged, but done right they can be a lot cheaper than payday loans.

And actually, he said, payday lenders have approached ZestFinance about partnerships, too, “but those are the types of discussions we’re more careful with.” Most aren’t evil, he said, they really do want to provide a service, but their inability to assess risk beyond just looking at someone’s paycheck and work history has resulted in necessarily higher rates. If payday lenders want to stay relevant, though — especially as more banks get into the business of servicing small loans — Merrill thinks they’ll have to come around to ZestFinance’s way of thinking.

Douglas Merrill image by Pinar Ozger; banker image courtesy of Shutterstock user Goodluz.

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After a quiet testing period, the London-based company — which uses a peer-to-peer engine that lets people transfer money between currencies and countries at radically cheaper rates than traditional banking — is officially announcing on Friday that users can now move money into and out of Swiss Francs (CHF) and Polish Zloty (PLN).

It’s a new service based around a partnership with The Currency Cloud, another London finance startup that provides a platform for APIs to access banking services across 200 countries.

“When we’re looking at rolling out in new currencies we have to look at the regulatory situation and partner with a bank,” Transferwise co-founder Taavet Hinrikus told me. “The Currency Cloud help us with the banking component.”

“The systems for currency conversion used by banks are outdated,” added Currency Cloud CEO Michael Laven. “We’ve been working with Transferwise for quite a while… but while we admire their approach to mainstream customers, we’re in the background, we’re a technology platform.”

But while the choices of new currency may seem odd at first, there are good reasons for both Swiss and Polish links. The company is currently regulated to operate across Europe, and beyond Euro payments it now has access to the extensive Swiss financial system and Poland’s large community of ex-patriot workers who are spread all over the continent.

Since launching last year, Transferwise has already process millions of Euros in payments for its customers, and now counts PayPal co-founder Max Levchin among its investors.

But Hinrikus suggested that with the help of The Currency Cloud, his company could begin expanding into new currencies — including what could prove to be the biggest prize of all.

“Without them it would have been much harder to do this,” he told me. “We’re looking forward to adding new currencies very soon.”

Including the U.S. dollar? He wouldn’t say exactly, but suggested that it might have moved up in the company’s plans.

“It’s definitely much closer to happening than it was before,” he said.

Photograph of Taavet Hinrikus and Kristo Kaarman used under Creative Commons license courtesy of Seedcamp / Money photograph copyright Shutterstock/Glovatskiy

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(c) 2012 Pinar Ozger. pinar@pinarozger.com

ZestCash CEO and founder Douglas Merrill, who formerly served as CIO at Google appeared at GigaOM’s Structure:Data conference to talk about how ZestCash uses a wide array of data to help qualify people for short term loans. The company, which launched in 2010 and raised $19 million last year, has been giving $300 to $800 loans to users based on thousands of variables, which are boiled down to 10 models. Merrill is cagey about which data points are used but he said ZestCash does not factor in FICO, the credit score most often applied by lenders.

FICO uses 15 factors to determine who gets a loan, but that often leaves out at least 15 percent of consumers, who don’t qualify according to those standards. But by drawing in a lot of online data, ZestCash is better able to predict if a consumer will pay back their loan. The company now boasts a default rate well below half of the 40 percent rate in current loans.

For example, Merrill said by examining a user’s pre-paid phone account and checking for defaults, they can get a much better sense of whether they are likely to default on a loan. “If they lose (their phone), they lose their connection to the world. It’s a hugely important credit signal,” Merrill said.

By being smarter about which data it uses to rate consumers, ZestCash is able to charge half the fees of traditional payday loans. That can mean $600 more a month for a consumer, he said.

For now, Merrill thinks the ZestCash model will focus on underbanked users, who can’t get access to credit cards. Ultimately, he thinks ZestCash’s techniques — which he calls “big inference”, not big data — can be applied to all credit cards users.

“I think that approach will be so powerful over the next 5-10 years, you’ll see everyone migrating to this big inference approach,” Merrill said.

Watch the livestream of Structure:Data here.

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Apple becoming a bank is a pretty off-the-wall idea and not likely to become reality any time soon. But the study demonstrates the kind of trust that Apple has built up with its brand. Two-thirds (66 percent) of respondents cited “trust” as their primary reason to consider Apple for banking, and a little over half believed Apple could making banking with them easy to access and manage and reliable. KAE said that Apple would face no capital constraints in building a deposits base, even with its recent dividend and share buyback plan. And with its history of successfully cross-selling products, its potent retail locations and affluent customer base, Apple would be well positioned to become one of the most profitable consumer banks, KAE said.

Lee Powney, chief commercial officer at KAE, said it would be very unlike Apple to delve into banking, but the temptation could be hard to resist. Apple would only move in, said Powney, if it changed the existing rules of competition.

“The strength of Apple’s relationship with consumers is a result of its ability to redefine the terms of competition in an industry and design emotionally rich ‘human’ experiences,” said Powney. “This research tells us Apple customers perceive a fit where at first glance we would assume the brand could not travel. To observe a ‘wrong’ and ‘make right’ is a core characteristic of this business. Apple’s ethos, its way of being and way of doing is instinctively understood by its customers. This makes it a truly dangerous animal to a startling array of sectors.”

Maybe not banking, but how about mobile payments?

Again, Apple, is very disciplined about what areas it moves into and is famous for saying “no” to all kinds of projects. But the numbers indicate an openness from the public for Apple to get into more financial services. Apple may not want to get into banking, which would carry a lot of regulatory burdens, but it could take that trust and build a mobile payments service, something we’ve speculated about.

Apple’s brand is very much tied to computing and services built around that. But increasingly, the bigger game in mobile is turning to payments, which could be worth $670 billion by 2015. That’s a market that everyone from the carriers, banks, credit card companies and a host of start-ups would like to own. Apple already has a strong financial relationship with its consumers via iTunes, which is believed to have more credit cards on file than any other company. Apple has already applied for patents that could lead to an end-to-end system that would include mobile marketing, mobile payments and mobile retailing.

Apple also has a pretty smart customer base that may be open to some kind of financial play. KAE found that 81 percent of respondents open to banking with Apple are technology savvy and are already banking online. The survey found that 62 percent of these consumers already show great interest in using their smartphone for personal banking and 53 percent believe call centers will be replaced by online service centers.

I would be very surprised to see Apple make the leap into banking, though mobile payments is not a stretch. Consumers are already able to pay with their iTunes account for smaller items at Apple Stores using an App Store app. But whatever happens, it shows that Apple has a lot of options when it builds upon a foundation of trust, innovation and ease of use.

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As many as 10,000 customers in the Baltic republic withdrew large amounts of capital from both Swedbank and SEB, emptying cash machines of $29 million and leading to local reports of long queues and spreading concern.

The banks — which both deny that they face any problems — say that the alarm was sparked by a groundless Twitter rumor suggesting Swedish banks were preparing to withdraw their business from the country, and that their ATMs would soon become useless.

That seemed to be enough to work up customers in the Baltic state — which, with a population of 2.2 million people is around the size of Utah. According to Reuters:

One man, standing in a queue at a Swedbank ATM in central Riga, said he had heard a report the bank was about to go bust. He declined to give his name. A woman, who also declined to be identified, said her son had called her and told her to get her money out of the bank, but that she didn’t know anything more.

The news may have been spurious, but it tapped into the wider mood of worry: two weeks ago the Latvian government stepped in to take over struggling local bank Krajbanka. It seems like the rumor was perfectly built to infect the public.

But was this a “Twitter bank run”?

I am always skeptical of anyone ascribing public action to social media, as if people themselves play no part in events.

Take, for example, the London riots earlier this summer, which politicians and many media outlets were quick to describe as “Twitter riots” or take aim at BlackBerry Messenger.

Turns out that although messaging was used by some rioters for loose, spontaneous coordination, the meme was spread largely by word of mouth. In fact, recent academic research suggests that social media was actually positive overall.

“Politicians and commentators were quick to claim that social media played an important role in inciting and organising riots,” Professor Rob Procter of the University of Manchester told The Guardian recently. “In contrast, we do find strong evidence that Twitter was a valuable tool for mobilizing support for the post-riot clean-up and for organizing specific clean-up activities.”

Despite my hesitation, however, early indications here seem to suggest that this actually was a problem exacerbated by Twitter.

In fact, the Latvian financial regulator made a public statement saying that customers had “no need to worry” and that the run was the result of a “groundless wave of rumors… on Internet media and social websites”.

Recognizing this is important, because it shows that spreading incorrect real-time information can have drastic — even tragic — outcomes.

We’ve already seen the damage that real-time feedback loops can have on highly automated systems like the financial trading markets — sending stocks plummeting in seconds as poor data causes software to make a cascade of increasingly negative decisions.

Imagine the potential for this sort of problem. Sure, this time Swedbank and SEB were able to absorb the impact, but it’s not hard to imagine a situation where the accelerated spread of information actually ends up causing the problem it’s warning people about.

I doubt this is the last time we’ll hear a story like this.

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