put into a 12-month CD. They enter those parameters into MoneyAisle, and their request goes out to dozens or hundreds of private SAEs, each one programmed to submit bids against competitors based on formulas determined by the individual bank.
“Say a bank needs to raise $10 million in seven days,” Chatter explains. “They’ll put an upper limit on the interest rate they are willing to pay and how quickly they want to raise the money. For example, they could set it to bid aggressively in the early days, but as the engine wins bids and starts to fulfill its target, it could slow things down. That’s where most of our intellectual property is—those algorithms that shift the bidding based on what is happening in the market and where they are in respect to their targets.”
Because the whole process is automated, many rounds of bidding can occur in just a couple of minutes; at the end, the prospective customer is presented with an offer from the bank that offered the highest interest rate. “The customer is guaranteed to win at the end of the day,” says Chatter. “It only takes a couple of minutes, it’s free, they don’t have a commitment to buy, and they get a better rate.” On the other side of the equation, the banks get a shot at new business without having to shell out for expensive and unpredictable online ads. The winning bidder pays a flat fee to neoSaej, and participants’ only other cost, says Chatter, is a small fee for joining the MoneyAisle network.
“At the end of the day, a bank has nothing to lose by joining,” says Chatter, who co-founded and led network router makers Nexabit and Axiowave prior to his latest venture. “If they succeed, they pay. If they don’t succeed, they don’t pay.”
For its public launch today, neoSaej has talked 102 banks into joining its network. Within months, consumers will be able to buy more complicated financial products through the network; while the company isn’t talking about the details yet, Chatter says it will use a number of mechanisms to help consumers make clear comparisons between competing bids for products where the interest rate isn’t the only variable.
The SAE network “is empowering the small banks and the mid-sized guys by giving them a chance to become the next ING,” Chatter argues. “They don’t have to open new branches, they don’t have to spend a dime on Google ads. Consumers will share the benefit when the middleman is cut out—since the credit card companies are booking 25 to 30 percent of their business today through Web advertising, and that cost is passed on to the consumer.”
To be accurate, Chatter and his partners at neoSaej aren’t cutting out the middlemen entirely—they’re just nominating themselves as a less expensive alternative. But that’s the way business has worked for thousands of years, says Chatter. “Our model is really just the medieval bazaar of 500 years ago. The sellers stand around and keep lowering their rate until eventually you get the best one. We may be transforming it using the power of software and the Internet, but it’s exactly the same process.”
Addendum, September 28, 2008: The New York Times’ business section has discovered MoneyAisle, in a piece published today in its “Novelties” column.
