The following was produced by Tearsheet Studios. We worked with Fiserv, a financial services technology company, to create a four part podcast series on the role and changing nature of data aggregation in the financial industry. You can read and listen to the first episode here.
In this episode, we spoke with Paul Diegelman, VP of Fiserv side by side with Adam Watts, president and COO of Save. The companies are working closely together to power a new type of savings account that combines savings with investment technology to give higher FDIC-insured returns.
There’s a sea of sameness when it comes to banking apps. And with really low interest rates, there’s little to differentiate between all the plain-vanilla offerings. Save is different — it uses a creative combination between savings accounts and investment technology to give its customers higher returns on their savings and rewards on their cards. I spoke with Adam Watts, the president and COO of Save.
Adam Watts, Save: I’m the president and COO of Save. We are a wealth advisor focused on your cash and your spending, and provide you with tools that allow you to be able to optimize that. If a user uses all of our tools, they’re able to potentially achieve fairly high rates of return, without any risk whatsoever, all while being in FDIC insured bank accounts.
Prior to joining Save, I was a partner in a money management firm focused on delivering dynamic multi-asset trend following indices. Ultimately, that type of an index would be known as a quantitative investment strategy. We were pioneers within that space; we had the first such index within a mutual fund in the United States, the first within an exchange traded note, first within an ETF, as well as more recently, the first within an annuity product. When you look at my career, it has coincided with the growth of indexing, ETFs, and working with banks in order to develop principal guaranteed products that were linked to our indices. And so all three of those things became the basis of what we do at Save.
To scale this solution, Save turned to Fiserv. Fiserv’s Paul Diegelman also joined us as part of this conversation.
Paul Diegelman, Fiserv: Hey, it’s Paul Diegelman. I’m a vice president with Fiserv, and my team focuses on open banking, connectivity, aggregated financial data, and account and identity verification. I’ve been at Fiserv for a little over five years, and joined to help launch a series of digital payment products; as we saw the convergence of money movement and payments with aggregated data and other forms of connectivity, my team jumped into that space and we’ve been operating there for a couple of years. It’s in that space that we met Adam and the folks from Save, and we’re glad that we did.
Oftentimes, in fintech, it’s at the intersections of different fields where the magic happens. It took investment professionals moving into the world of banking to come up with Save’s approach to increasing yield on basic accounts.
Adam Watts: Save’s mission is to create the world’s premier savings platform, and our goal is to optimize a person’s yield or return on their cash or their spend. We integrate market returns into bank products by forming partnerships with FDIC insured banks to convert their plain-vanilla banking products — be that a savings account, a checking account, a debit card, or even a credit card — into investment vehicles. It gives our customers the best of both worlds: the safety and security of an FDIC insured bank account, combined with the return potential associated with a market linked portfolio.
When you compare our market linked versions of bank products to the traditional versions of those, typically our return potential will be around two to three times better than what you would see with the market leaders within that space. But if you compare it toward the average version of those bank products (given that most savings accounts earn fairly little right now), we’re returning many multiples greater than that.
In addition to its Debit card, Save has plans to roll out other complementary products that infuse market returns to an FDIC-insured savings account.
Adam Watts: Last spring, we launched our debit card, the Save Debit Invest card. Its proposition is fairly simple: we’ll match every dollar that you spend in qualified spend with a dollar in equivalent portfolio investments. That means if you spent $1,000 in your debit card in a month, we’re going to match that with $1,000 in equivalent investments. The investment’s term lasts a year, so after a year you don’t get to keep the $1,000 in investments, but you do get to keep the return associated with that $1,000 in investments. That translates into an average return potential of about 3% cash back — compared to the best debit card in the United States, which has roughly a cashback feature of around 1% with a lot of caveats associated with that, while most debit cards don’t return anything at all.
In a few weeks, we plan on launching our market enhanced savings account that works in a similar fashion, where we replace the interest that you would earn on your savings account with market linked returns. The market link return element allows that account to similarly achieve several multiples of what you would see with the leading savings accounts within the United States and many multiples better than the average.
And lastly, at the beginning of next year, we expect to launch a credit card that works in a similar fashion to the debit card, in the sense that it matches your spend with investments. But because the credit card space has more favorable economics, we’re able to pass that value on to our customers in the form of more investments. We expect, based on the current design, for the return potential for that to be 6% on everything that you spend. So if you compare that to the top performing cards in the world — Amex, platinum, Chase, Sapphire, etc. — it’s making several multiples of what they make. Our goal is to have the best credit card in the world from an economics perspective.
This creative approach appeals to the newer generations that are starting to build their wealth. It’s also automated, so they don’t actually need to do anything different to earn these returns.
Adam Watts: It’s something that we’re pretty proud of, especially for the younger set that doesn’t necessarily have a lot of savings. Everybody has spending, right? So it allows them to be able to use that spend to be able to actually increase their investment portfolio, which is really cool. We never put the client’s money at risk. It’s a big mantra of ours.
Fiserv is a large organization and has activity in a lot of different parts of the financial ecosystem. It works with firms like Save to bring rigor and scalability to growing banking and investment products.
Paul Diegelman: We describe ourselves as a firm that enables money movement for thousands of financial institutions and millions of people in businesses around the world, in a world that, as we say, never powers down. We process more than 12,000 financial transactions every second around the clock. It’s a tremendous business that runs at scale across a wide array of products, and a number of those products resonate with wealth and technology firms. It’s Save’s emerging presence in the space, from a wealth and a technology standpoint, that attracted us to their proposition and our interest in working with them as they continue to scale their business and take it out to more and more consumers in the US.
Getting a new product off the ground requires changing the laws of physics. In Save’s case, the founding team came from financial services and had a deep understanding of what it would take to pull it off.
Adam Watts: We all come from what will be described as ‘traditional Wall Street backgrounds’, and one byproduct of that is that we’re pretty sensitive to the regulatory requirements that are a part of that. Our DNA from the traditional Wall Street background certainly informs our decision making. We also have great technology chops. We come from a high speed trading background, as well as high frequency trading, and automated trading systems. Still, we would describe ourselves as a finance first management team, which informs our decision making in a variety of ways. One of them is in the AML KYC area; we take a very conservative approach to that. So much so that as a wealth advisor, we expect to reject an upwards of one out of every three applicants to our platform.
To issue a Save card, the company actually opens two types of accounts with different types of requirements. Getting those mechanics right requires some heavy lifting on the back end.
Adam Watts: As a part of the onboarding process are going to open up both a bank account and an investment account. And depending upon the actual account structure, we may open up multiple bank accounts with different FDIC insured institutions. Unfortunately, we probably have one of the more onerous signup processes that exist within the space, because we have to satisfy so many different needs. With respect to ID verification, we have to conform to the AML KYC processes of both the banking institutions, as well as our investment banks.
Whenever we began the process of actually building out the platform this was a big concern of ours, because we were unsure how we were going to be able to replicate this traditional AML KYC process that we had been bred into during our careers. While, on a personal level, most of my bank accounts were actually opened up in person. So that in-person aspect of the ID verification process was also an important component of the AML KYC process. As it turns out, an entire ecosystem exists in order to support ID verification, of which Fiserv is a big part of — they solve some important components of our process, and so they are a part of the platform in general in terms of how we’re able to achieve what we’re achieving.
Save turned to Fiserv, after first working with another provider, to help with the safe and secure opening of digital accounts.
Paul Diegelman: As Adam mentioned, the Save model centers around opening bank accounts and investment accounts for their clients. Fiserv is fortunate in that we get to host the infrastructure for thousands of banks and credit unions in the United States.
The concept of digitally opening bank accounts in a safe and secure manner is something we’re super comfortable with, because we do it every day. So the opportunity to work with Save to do something we’re really good at with traditional FIs, and now in a fintech wealth model, was really appealing to us. As we worked with Adam and his team, we looked at a number of things around what was important from a UX standpoint — this needs to be done in a digital fashion that is safe and secure, but it also needs to be delivered in a model that consumers can understand, appreciate, and that moves at their speed.
Adam Watts: Everything that we do is a completely online experience for our customers, and any type of friction that exists in that signup process is going to likely lead to abandonment. As a firm, we spent a lot of time trying to reduce that friction as a part of the signup process from a UX perspective. The problem, of course, is that the digital ID verification component is the source of the greatest friction. Given that we’re economists at heart, this tension exists in terms of what we do: wanting to reduce the friction as much as possible, while at the same time meeting all these AML KYC processes, as well as preventing fraud, which is rampant within the space.
Fraud has increased, I believe, around 150%, since the start of the pandemic. Firms like ours are in a constant battle against fraudsters, and the economics associated with that are huge. If you can find tools that are capable of being able to reduce the friction element associated with the ID verification process, while at the same time effectively addressing the fraud component, the return on investment for a firm like ours is huge. Which is exactly why we reached out to Fiserv — they make it easy for our customers to be able to authenticate their bank accounts. Their VerifyNow system allows us to have tools that satisfy different customer needs, and that has dramatically reduced the friction on that.
When you start to drill down into digital financial services, customers aren’t a monolithic bunch. Different demographics and socioeconomic groups respond quite differently to different parts of the onboarding process.
Adam Watts: Since we launched, we learned that different socioeconomic demographics respond differently to the friction associated with the signup process. Younger people are more willing to deal with the friction associated with ID verification than older signups, and especially older signups with money. What Fiserv does with their methodology is making it easier for both groups, in order to be able to reduce the friction. It’s a big deal for us.
Paul Diegelman: Different types of folks have different types of behavior in the way they want to authenticate and verify themselves. Generally speaking, younger people are interested in providing their bank account and routing number to verify that they’re the bank account owner, whereas folks that might be older are less inclined to do that — they’re more interested in rendering their routing number and their bank account number. The VerifyNow product that Adam mentioned is in use by a wide array of banks and credit unions today. It allows users, through a fairly straightforward UX, to provide the information that they are comfortable with providing, and then we can go out and grab the signals that banks or fintechs like Save need in order to continue the journey of enrolling a customer in a proper and quick way that meets the data elements that the customer is prepared to render at that time.
I’m excited to see that the way the ROI around abandonment seems to be coming to fruition, and the thing Adam and I will continue to work on is: can we can we drive abandonment to its lowest possible level, while at the same time not creating a negative signal that creates abandonment where it otherwise shouldn’t have happened in the first place?
Adam Watts: When we launched the product, we were not originally using Fiserv. And what we found was that even during our friends and family beta testing period, the investors in our company — the people that had the greatest incentive of all to see the success of our company — were unwilling to give their username and password as a part of that bank account authentication process. So early on, we recognized that we needed a solution to be able to address that, especially for the savings product, where you’re dealing with customers that are going to be transferring fairly large amounts of cash into the savings deposit, and need to feel comfortable linking their existing bank accounts to Save in order to be able to transfer those funds. It’s crazy, because every decision you make makes a difference. This is for sure a leverage point in terms of our ability to go to scale with a very large audience, no question about it.
Save is just getting started. After launching its debit card last spring, the firm has been ramping its customer acquisition.
Adam Watts: We launched the Debit Invest card late spring, started ramping things up in May, are signing up around 150 customers per day on Save, and we have a little more than 15,000 customers that have signed up to date. Customer engagement is a really interesting process to watch. One of the areas that I’m very proud of is that our conversion rates on our paid digital marketing are on average above 25%. So that means one out of four people that click an ad and go to our site actually ended up signing up; that speaks to how the value proposition of matching your spending with investments resonates with a lot of users.
What’s equally interesting is to see how people behave in a fairly conservative way with respect to their finances. What we’ve noticed is that our customers go through a process of experimenting with the card; one aspect of the product is that we have an app, where every time you make a purchase will send you a push notification, telling you that the purchase was matched by investment. So you go buy a $5 cup of coffee, you’re going to get a push notification on your phone telling you that you just got $5 worth of investment matching as a result of that spend.
What we see is that customers start off experimenting with what will actually get investment matching. And then as they progressively get more engaged, they start experimenting with unusual purchases. We’ve seen some users go through the process of using the debit card to actually purchase an air conditioning system for their home; we’ve seen some users use their debit card to actually pay for their taxes — all of which have gotten investment matches. This is unheard of, of course. So it’s pretty exciting to watch how our users are responding.
We’re excited because we’re in the midst of launching the savings account, in a matter of weeks, then the credit card’s coming. And we’re a competitive set, so we like to say that we’re going to take on the whole credit card world, and that’s something we’re pretty excited to do.