Revolution Money, Mint.com, BillMonk, PayPal, Buxfer, expensr, Cake Financial, Geezeo, Thrive, Jwaala, PearBudget, GreenSherpa — essentially they all play in similar spaces: online personal finance.

Any regular reader of Bank Innovation will agree that Wesabe’s failure is no surprise. The threshold for success in online PFM is so high — in the consumer space, a successful PFM will need tens of millions of customers, not millions to be able to morph into a true financial services provider — that the odds of coming through are incredibly low. In fact, in 2008 I began working on a startup myself. We were far along in the process, with angel investors lined up, but I pulled the plug even before the startup. I knew it was a bad bet.

Wesabe was a bad bet for its investors, O’Reilly AlphaTech Ventures and Union Square Ventures, who together invested $4.7 million in Wesabe. But it was not the only bad bet out there. Geezeo has already migrated away from a consumer-centric business model. Yodlee’s core business is serving other banks, not consumers through its PFM.

All this points to the core dilemma when trying to innovate in banking. Banking may be about the software, but it is also about money, and the massive pools of capital controlled by the nation’s largest banks impedes innovation by the likes of Wesabe simply because the Wesabes can’t reach critical mass. We at Bank Innovation pine for enlightened advancement in banking. The truth is, however, most of that advancement will come from hybrid efforts that encompass startups and established financial services firms. That’s why Mint sold to Intuit. Going at it alone would have left it in Wesabe’s lots, and no entrepreneur wants that.

More coverage of Wesabe’s demise: