What now for 22seven?

Now wholly owned by Old Mutual, the local personal financial management service has its sights set on international growth and mobile.

Read time 8min 50sec
CEO and founder of 22seven, Christo Davel, says with Old Mutual's backing, 22seven has been given the opportunity to "really do something impactful".
CEO and founder of 22seven, Christo Davel, says with Old Mutual's backing, 22seven has been given the opportunity to "really do something impactful".

Following its acquisition by Old Mutual, 22seven, the local start-up that caused uproar in the local banking sector last year, has now been granted a global platform for its personal financial management service.

CEO and founder of 22seven, Christo Davel, says the stress has now shifted from "having to pay for things as a start-up" to having to deliver on a business that needs to run in the UK and other territories while also having to continuously develop the product.

This new path for 22seven together with Old Mutual is somewhat of a departure from Davel's initial vision. Davel had been adamant the platform should remain objective and that he had no interest in being bought out by one of the big players.

When asked about this change of heart, Davel says: "The intent we had in the beginning hasn't changed. We've always said we want to remain agnostic. We wanted to claim that space that only worries about the customer. We were very aware of the inherent conflict that exists between any financial institution and being an objective advisor. It was always our understanding that our customers have more than one financial service provider and we wanted to provide a holistic view of this."

Davel says as he was seeking the next round of funding, it became apparent to him that there was a need for an alliance with a partner that could offer access to a large customer base. He pursued this with Old Mutual's director of strategic marketing, Carlton Hood, who showed Davel what the company was already working on in the personal financial management (PFM) space in the UK.

"It was scary to see the overlap. So it didn't take long for us to realise that there was serious intent from Old Mutual to do this with us," says Davel. Hood told Davel that Old Mutual was not interested in being one of many in a funding round, or a minority shareholder, and instead proposed the acquisition.

Hood says: "Our conversations, to be honest, weren't really about price and structure and so on. They were about whether or not we shared a common vision. I don't think this would have worked otherwise. I think that's why the whole team is still there. I also think that that's why maybe Christo has relented a bit on that strictly independent vision he had in the beginning."

Other PFMs are like going on diet. The existing industry is still used to simply telling and advising people what to do.

In terms of integrating 22seven into Old Mutual's digital strategy, Hood says: "We certainly plan to make it available, or to offer it to our Old Mutual customers over time. What we haven't done yet is plan the details, so we've been spending time this week talking about it, how to do it, who the right customers are. We haven't bought 22seven to keep it as a completely standalone service. We think we have customers who would really want this, and we want to make it available to them."

While 22seven does not reveal its user numbers, there have been mutterings that the user retention, after the service came out of beta and became a R70 per month subscription service, was not as good as it needed to be.

What is 22seven?

22seven aggregates data from its users' online banking profiles to create a "smart statement" with detailed categorisation of spending. It uses a mixture of gamification and behavioural science to change users' attitudes towards money. The service launched in public beta in January 2012, and came out of beta in May last year.

Hood says: "I think that for a tech start-up, with no marketing, they've got a good number of customers. But it's nowhere near enough for Old Mutual. But on the other hand, that's a lot of what we bring to the deal - so I wasn't really worried about the number of customers 22seven currently has because I think one of the things that we will bring is the ability to engage with the market."

Davel will remain as CEO of 22seven, and the entire team will remain as is at their premises in Cape Town, only now they will report to Hood in the UK. Davel says: "We started this with thorough planning; the team and I didn't decide to do this [create 22seven] because we wanted to sell out to a bigger player. We wanted to do something that could really make a difference and we haven't done that yet. This transaction gives us the opportunity to really do something impactful, and that drives us more than anything else."

Hood adds that he believes it's important for 22seven to remain at its current premises. "We need it to be a catalyst for a new way of doing things, and if we picked up the staff and stuck them at Old Mutual Park in Cape Town, I think we would lose the value of what we bought."

The relationship with financial aggregator, Yodlee, will also still be managed by 22seven. Hood says: "There's definitely some synergy to be had, but I think it's important that these guys manage their own end-to-end value chain. So I'm not interested in turning the Yodlee contract into something corporate. But we will work together to make the most out of it and to get the best value that we can."

Mobile ambitions

Looking ahead for 22seven, Davel says its first mobile app will be released "soon" and has hinted that it will be within the first half of this year.

PFM tools and SA banks

Of the 'big four' SA banks, Nedbank is the only one to currently offer a fully-fledged PFM service in the form of MyFinancialLife. The service is open to both Nedbank and non-Nedbank customers and, like 22seven, uses Yodlee to aggregate data from users' online banking profiles. The interface follows the basic look and feel of Nedbank's online banking services. Users can create and track their budgets and savings goals, while also viewing their spending patterns in bar graphs and pie-charts. Absa has been the most vocal against users using third-party PFM tools. The bank launched its revamped online banking services last year, under the name 'Absa Online'. The redesigned service includes rudimentary PFM tools, and is currently limited to basic budgeting. It is also limited to Absa customers and only includes Absa services. FNB said in August last year that it was piloting its own PFM service and that it was aiming to launch it by the end of the year. The bank is yet to make any further announcements, although it was the first to endorse 22seven and to advise its customers on how to safely use the service. Standard Bank has also said it is working on building PFM tools into its online banking services, but has yet to make any announcement to this effect.

"We have our iPhone app in testing phase," notes Davel. "The challenge with making a really awesome app is far greater than making a sexy browser. Because you have far less real-estate to work with and it has taken a lot of thought. There's been pressure to already roll something out. But it's coming soon - for us it's always been part of our strategy."

Davel says the decision to build an iOS app first was based on research into which platform was the most popular among 22seven's existing user base.

"Some people might say it's a silly move because Google is the biggest player and Android is taking over, but we asked our customers and the feedback we got was that they were mostly using iOS, so it would be silly for us not to do that. Of course we will have an Android app, that's a no-brainer. But the fact is: the element that takes the longest to build in a mobile app is the design. Once you've cracked the design, building it for other platforms is quite quick. So the first rollout always takes the longest."

In terms of other features, Davel says the 22seven team is consistently working on updates to the user interface and "we roll out things as they make sense".

On the question of improving user engagement and encouraging them to continuously return to the service, Davel says: "We have the savvy and the capability to engage in a far more intimate basis.

"We think it can be done slicker [than e-mail and SMS]. If you have an iPhone app and you see that red notification, you'll immediately go in and check to see what's happening."

Davel believes mobile will be integral to making 22seven truly part of its users' daily lives. "That's where the stickiness comes in. People don't exactly rush to their browser three times a day to track their spending. It's much easier to whip out your phone. It wasn't that we forgot about that type of engagement, we just want to do it differently and do it properly."

On the question of the use of Flash for 22seven's Web interface, Davel maintains it was a tactical decision. "We had a dream to be HTML 5 from the word go but we just couldn't find skilled, qualified developers to build it to the level we wanted. So we made a tactical decision to start off with Flash and as we migrate to mostly mobile-only users, Flash will disappear."

Where the future is

As the PFM space looks to become increasingly crowded this year, with offerings from Absa, Nedbank and even First National Bank, Davel says whenever there is a shift in an industry there will always be a "plethora of new players".

"In any industry you'll inevitably have a lot of people starting out in the space because there's a real need, and then you have a drop off of most of those players. The ones that survive are the ones that didn't necessarily have five wheels on their car, but they're the ones that simply do it better," says Davel.

"In the local PFM space, we'll probably have one of the institutions end up with a holistic product that will be very successful. All the others will just attempt to do this but it will be limited to just budgeting. If you look at the other PFM tools in the world, they all started off and just copied what was available, without really offering a different user experience.

"When I say user experience, it's not just about it looking sexy - there's real deep thinking that goes on in 22seven about how people behave and how to change that without it feeling like doing homework or going on diet.

"That's what I think - other PFMs are like going on diet. The existing industry is still used to simply telling and advising people what to do. But there's a groundswell of savvy people who want to make their own budgets, access their own information, and want to play with simulators to see how different scenarios pan out. That's where we think the future will be."

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