‘Our bet is that ESAs will be similar to the last 20 years of HSAs’: SecureSave’s Devin Miller

There are a couple of things about advances in financial services that continuously get me juiced – even after a decade of covering the space. One is when new products emerge that just work, whether that’s through integrating into existing platforms or through automation. There’s something almost magical when that happens. Another thing that inspires is inclusiveness – there’s so much being done at incumbents and fintechs that will make financial services more inclusive in the future.

SecureSave ticks both of those boxes. It’s trying to popularize the Emergency Savings Account. Haven’t heard of an ESA? That’s OK, I hadn’t either, but it functions similar to a Health Savings Account and is intended to help employees save for an emergency. Offered through employers, an ESA is likely to have the same preferred tax treatment an HSA has in the future if Devin Miller has his way. With a strong background in financial software, Devin is a co-founder of SecureSave and is following the HSA playbook for bringing his firm and ESAs to market.

Devin Miller is my guest today on the Tearsheet Podcast.

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The following excerpts were edited for clarity.

SecureSave and the Emergency Savings Account

Devin Miller, SecureSave: SecureSave is a financial technology product that is trying to reinvent the emergency savings account. And we do that by working with employers and big financial services companies to provide emergency savings accounts to employees through their company as a new type of workplace savings program.

An emergency savings account is kind of a new category of workplace savings product. Think about the 401k or the health savings account. The 401k has been around for 40 years, and the HSA has been around about 20 years. Predominantly, you access these products from your employer through work. The ESA, or emergency savings account, is very similar. It's something that predominantly is introduced to an employee by their employer. It has an automatic payroll deduction to it just like an HSA or 401k. And there are incentives provided by the employer.

It's pretty new, though, in the sense that unlike the HSA or 401k, it's not really a government structured program. HSA has really good tax advantages – 401k, as well. The ESA is at its infancy, but there is pending legislation around ESAs, so there's likely going to be tax advantages and more automation, even things like automatic enrollment are coming. And so a couple of years ago, when we launched our company, we sensed that this was a trend that was going to take off and that the pandemic would accelerate it. Our bet is that ESAs are going to be very similar to the last 20 years of HSAs. Today there are like 33 million HSA accounts with $150 billion in assets in the US. And we think HSAs are actually a bigger market opportunity. We're trying to lead that category.

How it works

The mechanics of the ESA look like this: The employer is the one that introduces it to their employees. We send out invitations, and that invitation essentially frames the program, and it says, “You (the employee) are going to get a free emergency savings account that you have full control and access to – no limitations, no restrictions. You can take it with you if you leave. It doesn't cost you anything as an employee; the employer is paying for it. And it's automatic through your paycheck: you just have to enroll, and the money flows through your paycheck into this emergency savings account. 

It’s an FDIC insured account and can earn interest. But really the big incentive is the automation, the full control and access, and an incentive. That incentive usually looks like a $25 to $50 signup bonus – it could be $100 – just for signing up. Then typically, we encourage employers to have a drip campaign, so long as the employee is putting in something like $25 to $50 per paycheck, then the employer will match something like $2 to $10, maybe even more. It turns into an effective interest rate or rate of return of like 10% (we see some employers go as high as 100% return) as long as you participate. 

And then there's often what we call ‘milestone bonuses’. An employer can set up a goal for a certain number of pay periods, or if an employee hits a certain amount, the employer might top her up like an extra $100. Usually, the investment by employers is $100 to $500 per year per employee. But like the 401k or the HSA, it's free money for the employee. And even better – in the case of ESA – there's absolutely no restrictions or limitations to what you can use the dollars for. So it's super popular with people, especially low to moderate income employees that are just trying to get started on that path to saving. We get an almost 60% adoption when we deploy.

Distribution

When we were very early in the process of thinking about SecureSave as a company and how we would do this, we got really excited when we started to dig into the leading HSA providers. We looked at firms like HealthEquity, or WEX, and how they built their business and what their strategy was. And we saw, for example, that for HealthEquity, 80% of its business came through distribution partners, a wide variety of distribution partners. They ended up with a wide diversity of employers – lots of little tiny ones and many mega companies use firms like HealthEquity for their HSAs. HealthEquity is the number one market share player, and it's been around for about 20 years. So it's a really good company for us to study. 

And so we're like, why recreate this? So we can put down the business model canvas, all that stuff that you normally do as an early stage startup, and just copy what they did, because it seems like it worked really well. Our business model and products are very similar. And so we've been basically running that strategy playbook, where all we do is emergency savings. That's one of our big competitive differences. It's also something that makes our distribution partners very comfortable with us, because they know we're not going to sell a product into their customer base that then can potentially lead to competitive differences. 

Our third component is we still give them the deposits. And this is the key thing for firms like HealthEquity. So all we do for our distribution partners is non competitive, we have the best product, and ultimately, we give them the thing they want the most, which is the deposits. 

So our strategy is more about activating this broad base of partnerships. We have partners like Transamerica and Truist, which is a top 10 bank. Wells Fargo is a banking partner of ours. We're signing deals with all of these different providers so that they can get into the ESA space with best product, non competitive partner, and hold the deposits, which is what they want. We do some direct to employer selling, but mainly our business is going to be dominated by helping these partners be active in the ESA space. 

Financial wellness

There are a lot of players in the financial wellness space: insurance companies, big banks, everybody's in financial wellness now, but none of them are really having good success. They all want to talk about how important it is, and employers understand it, but we actually deliver results that lead to true and measurable improvements in financial wellness. The foundation of what people's financial health is based on is do I have money set aside in case things go awry in my life? 

And so if I'm a benefits provider, or I'm in charge of financial wellness at a company, and I think emergency savings is interesting, I'm not calling my payroll provider. That's just what we see in the market. I'm more likely to call my 401k provider, I might even talk to the company providing financial wellness solutions to me or into the market. They just don't call their payroll company. And so as a result, the payroll companies, when we talk to them, they're like, Okay, we kind of get it, but I don't know if this is a thing. It is a thing, but it's just not a thing for them. Which is fine. Benefits is a super fragmented market with so many different players and tons of overlap of providers that you don't have to sign with everybody, as long as you're signing with the right people. 

Suze Orman and SecureSave

Bassam Saliba, who's my co-founder and CTO, and I worked together for a long time. We've been in financial technology and venture backed businesses for a long time, worked together for a while, and we started working on SecureSave together. We're working with leading Seattle based VC called Pioneer Square Labs. And we were incubating the project (we brought the idea to them, working on it over the summer of 2020), and we were still doing customer discovery.

In the summer, our investor PSL said, hey, you know, we've got a contact into CAA, the big talent agency, who Suze Orman works with, and we've talked to CAA. And they're like, hey, somebody should do a fintech startup with Suze – would this team be interested in talking to her? I said of course, I'd love to talk to Suze – I long knew who she was and watched her show on CNBC. I got to Suze in late August, and I shared with her the brand, the mission of the company, which is to help people feel and be financially secure, and our vision for what we wanted to do, which was, imagine how different that pandemic would have been, if everybody had at least a few months of emergency savings. I told her how laser focused we wanted to be on emergency savings, and the strategy of replicating the HSA playbook. 

And honestly, she was like, I'm so in – I want to do this. Later she told us that she gets pitched all the time by fintech and she said the difference with what we brought to her was, everybody tries to convince her what they're going to do and how it's going to make her money. She’s already super rich and doesn't need more money, She wants to help people. And we were the first team that really brought her a vision of how we were truly going to help people. And that was the differentiator. 

We kind of instantly hit it off – Suze, Bassam, and I are very different. We’re kind of a strange trio of backgrounds and histories and personalities and skills. But you know, opposites attract. We've had this great magical relationship for two+ years now. Her involvement is really unique; from the very beginning, she did not want to be perceived as a spokesperson. We immediately saw that that was not going to be what the role and the value added was going to be. So we didn't announce her involvement publicly for months until we were live. Investors knew that she was going to be involved, but we didn't talk about it a ton. 

Her role today is a combination of things. She is very involved behind the scenes on strategy. Her actual title is Chief Strategy Officer. And part of it was because she's just got an amazing sense of the market and people in fintech and financial services – she's just been in it for so long and talking to so many people. I was really pleasantly surprised with her innate sense of the market. And then with people, she's got an incredible sense of product. She's not a product developer. She's not coding with Bassam, and she's not sitting down with our product team and designing stuff. But she has a great innate sense of people and has helped us just cycle through the product and iterate on it faster. 

On the strategy side, I actually thought she was going to be more scattered. I just thought as being someone who didn't have a deep startup history, that she would make all the standard rookie mistakes, like, let's do this, let's do that. She's very good at keeping more focused, and I think we're pretty focused, as is. But honestly, where she's got the biggest magic and force multiplier for us is on the go to market side. She just gives us a level of attention. And even little things like SEO, SEM, PR,  invitations to events, it just gives us such a massive advantage in go to market, and from there, the product kind of takes over. 

So it's kind of a unique thing, I don't think I could replicate this again – if I did another company like, hey, go find me a celebrity. Let's run this playbook. It's a very unique relationship, personality, and situation. But it's been hugely impactful for us. And she's been really fun to work with..

Product and marketing focus

We get asked all the time what other products we can sell. And we've tested a bunch of stuff with users and really what we found is that the more we lean into emergency savings, the better the product works in the eyes of consumers. They like it more. And I've seen this when I was in tax, and I was leading product for one of the major tax software companies, TaxAct. We used to joke that people come there to get a ‘big refund fast’. I just want my tax refund; I want it as big as possible, and really quick. I don't want to buy car insurance from you. I don't want an IRA. I don't want any of that crap, I want ‘big refund fast’. And all of the tax software companies have struggled to sell and do anything that is not immediately connected to the refund fast. 

That's kind of our mentality: how do we build and maintain trust that we're going to be the best emergency savings product? Then it becomes, is that a big enough market? And again, we point to the HSA market and say, you know, HealthEquity is like a $5 billion to $10 billion market cap company that's growing at 20+ %. WEX, same thing, like the second biggest provider in that space, and it's a $500 million a year revenue business, and growing 23% a year, super profitable. And that's the other thing that investors really like: the jury's still out on a lot of these fintech. Buy now, pay later is a good example – it was hot, but is that still really a sustainable business? And second, how profitable is it? For a lot of these companies, it's not known if they can actually make money at scale.

Revenue model

We copied the revenue model from HSAs. There's a lot of what's called PPM, or per employee per month. And it's about the same range – it can be down to sub $1, for really, really large employers to as high as $3 to $5 for smaller companies. We make money on deposits. We also make money from partners who integrate our solution into their products, like record keepers and financial wellness providers. They pay us platform fees, or they cover those PPM fees, so that they can bundle our solution into their product, and then give it away to the market. But either way, we make that PPM and we make money on the deposits. 

We work with multiple custodians, which is really unique to us. We can go to those banking partners and say we can bring deposits to you. And we get a little bit of a share of that. And then finally, there is a small collection of things that are very tightly knit to emergency savings. They can be transactional things like the different types of insurance products. They can be a higher level of depository solutions that we can make money off of at scale. And that's basically the model that you see with HSAs. And honestly, we didn't expect and I don't think anybody did, how fast the interest rate environment would grow and change. So the depository situation has become a much more interesting part of our business model.