savings apps Archives

April 5, 2016July 6, 2016

‘Slack Finance’: The rise of the message-like interfaces in financial services

rise of message like UI in financial services

Could 2016 go down as a tipping point year for chat technologies in the financial industry? Facebook users can already make person-to-person payments via the social network’s Messenger and soon will be able to pay for for services like Uber and Get Taxi directly from the chat function. In Asia, Chinese giant WeChat offers personal loans in minutes, using only a chat function.

The trend towards expanded use of text messengers is apparent even with automated savings apps like Digit, which uses an algorithm to automatically move spare change out of a user’s account and deposit it in a Digit virtual savings account. The app “communicates” with users via an interface that mimics text messages, informing them of weekly or monthly activity and to ask for authorization on some transactions. In the other direction, users have the ability to withdraw money from their accounts with a simple SMS.

Digit's savings app uses text messages — Digit’s SMS-like User Interface

The digitization of financial services

In some ways, the move towards chat functionality represents a reversal for the finance industry. For more than a generation, banking, investing, payments and other facets of the money economy has been moving steadily towards DIY service. Prior to the 1970s, banking, investing and other financial services were typically conducted via close interpersonal interactions – deposits and withdrawals were made by standing in line at your local branch,where your account was overseen by an account manager who knew you well. Stock trades were made with a phone call to your broker, who was typically a middle-aged man you’d developed a relationship with over your adult years and who knew your investment patterns and preferences.

Later came drive-through banking, followed in the 1980s by ATM machines. By the turn of the century, the internet gave individuals the ability to shop online as well to administer their financial lives, essentially rendering human contact in this area irrelevant. Online, bank clients could decide when and how they’d like to interact with their financial provider.

This gave way more recently to more fully set-and-forget type services. These rule-driven technologies give users the ability to automate their banking. But banks found their users had a hard time setting global rules to their banking relationships (like deposit $50 on the 2nd Thursday of every month). Yesterday’s self-service banking website is now being slowly replaced by automation and algorithm-driven banking services employing SMS and internet chat technologies to simulate person-to-person interactions for users. Though they’re prompted by an automated bot, services like Digit require users to lightly participate in decision making.

The move away from 100 percent automation serves two functions: first, to improve mobile financial security by requiring user input. Second, it caters to banking and savings app users’ need for communication. They use text-based communication tools like Slack at work to communicate with their colleagues and Whatsapp to talk with their friends and families. Today’s banking clients want that same level of interactivity from their banking apps, too.

In addition, the effort required to confirm orders and payments by SMS reduces the chance of mistakes by an inadvertent thumb-click to a “yes” pop-up button.

There are also social/sociological benefits to using chat technology for internet transactions, in addition to tangible reasons for apps to “interact” with users via text messages.

How do your students relate to all of these issues?

We asked James Berman, founder of JBGlobal and a faculty member in the Finance Department of the NYU School of Professional Studies, how his students relate to technology interactivity.

“I teach traditional in-person classes at NYU, as well as on-line courses,” explained the finance professor. “Many of my 20-something students choose to take my classes in person, even thought they cost more. They say the reason is simple: ‘I can’t learn that way,’ is a common refrain. ‘I need the face-to-face interaction with other people to really learn well.’

“So I’d say something similar here. Of course, the millennial generation wants banking and financial services online to be quick, efficient and easy, and that trend isn’t going anywhere. But they aren’t willing to completely forego the elements of human communication.”

March 9, 2016March 16, 2017

When the future of savings accounts is a mere swipe

We’re not wired to save money. Behavioral economics demonstrates that human beings, all things being equal, would rather consume their money today than save it and have more money to spend in the future. Today’s average American saves 5.1% of his or her personal disposable income. This number is close to a historical low — the only period since 1959 that clocks lower than this was recorded during the financial crisis of 2007-2008.

Our inability to sufficiently save is caused by poor behavior. Western culture encourages consumption — that’s even how growth is gauged in economic terms. The result is that millennials have historical amounts of debt. So, if behavior is part of the problem, it must also be part of the solution. Smart entrepreneurs have found technological ways to overcome our behavioral biases to make it easier to increase our savings.

One way to do this is by encouraging people to make micro-deposits. Instead of asking for a percentage of a paycheck or to transfer large sums of money, these micro-savings apps make it easy for users to make repeated small deposits.

Acorns is the most popular of these apps. The award-winning app makes it as easy as a swipe on a smartphone to save spare change from purchases. It works like this: an Acorns user makes a purchase say at a coffee shop and after completing the transaction, the Acorns app asks the user to round up the purchase (like from $3.25 to $4.00) and deposit the remainder in his or her Acorn account. Users can schedule bigger, more periodic transfers of money into their Acorns account but the mechanism to round up seems to be the most salient part of the user experience. It’s here that our struggle with saving for the future is met head-on and dissected into small, repeated actions, making it easier and habitual to sock money away for the future.

“People generally associate investing with lots of dollars,” said Jeff Cruttenden, CEO and co-founder of Acorns in an interview with CNNMoney. “Once [people] find out that you can invest spare change, it’s a really attractive concept.”

Digit takes a more automated approach than Acorns. For this mobile savings app, there’s very little interaction with the user. Every couple of days, Digit scans a user’s checking account and if a user can afford it, deposits $5-50 via a transfer to Digit’s savings account. There’s no need for a user to swipe as the monitoring and action of depositing money happens in the background. By scanning spending and income history, Digit takes away the need for any human decision making by automating the savings process.

“I’d never struggled with understanding the importance of saving, but hated the exercise of doing it regularly and having to anticipate changes in my spending and income. Thankfully, now the trustworthy robots powering Digit do all that for me,” said Alexis Ohanian, executive chairman of Reddit. He’s also an investor in the young company.

Getting money into the savings account, from a financial planning perspective, is the hardest part because you’re going against the grain of human nature. But once the money is deposited into these accounts, users have different options. For Digit users, their Digit account is a way station, a bucket to keep dollars saved for the future and ensure they aren’t spent. With a simple text message to the company, users can transfer that money back to their checking account. Acorns, on the other hand, is really an investment platform at its core. Once a user deposits money into his account, much of the experience is similar to other online investment advisors like Wealthfront and Betterment. Acorn users can choose from a handful of different portfolios and begin investing their spare change in the stock market with a particular investment horizon.

Both savings apps are transparent with their fee structures. Digit doesn’t charge for its service (yet) while Acorns does. Acorns charges a flat monthly fee ($1) for accounts under $5k and a 0.25% fee on assets for accounts bigger than $5k. The AUM fee is typical in the roboadvisor world. And as this article points out, the small nominal monthly account fee for smaller accounts ends up being kind of expensive if the account stays small.

What’s different about this generation of savings apps is that they’re mobile only. The entire savings process, from depositing to asset allocation to transferring back to a savings account, occurs on a smartphone. The user interface has to be clean and simple for a small form factor and much of the success these apps have had in attracting new users has come in no small part from their good design. If successful, the market potential is large for savings apps and that’s why both Acorns ($32m) and Digit ($14m) have raised a lot of investment capital.

February 24, 2016

How Qapital uses IFTTT to integrate its savings app into hundreds of apps

If millennials aren’t saving money, Qapital wants to change that. The Sweden-based technology company has an app that makes it super easy to begin saving more. After connecting to a US bank account, Qapital enables its users to set financial goals and begin working towards meeting those goals by automating the savings process. For example, as more millennials begin their careers by taking on multiple gigs, Qapital helps these freelancers automatically set aside a percentage of their income for taxes (something freelancers find hard to do with lumpy income).

From a behavioral economics point of view, getting users to set aside money can be used as a punishment or reward for certain activities. If automation of the savings process helps overcome individual reluctance to save, Qapital sought a way to embed itself more deeply in its users’ daily lives and in the apps that they use. But integrating Qapital’s saving mechanism into individual apps like Facebook or Fitbit is an endless, thankless process. Instead, Qapital turned to IFTTT to roll out its savings capabilities into hundreds of apps.

At its core, IFTTT enables individual users to get their various apps talking to one another (some have referred to the technology as digital duct tape). To begin using this API marketplace, users sign up for IFTTT and link up their various applications. From there, individuals create what IFTTT calls recipes. Recipes all follow a particular format: if X, then Y (IFTTT actually stands for if this, then that). Here’s a basic use case: every time you take a picture with Instagram, you’d like to save that same image to your Dropbox account. IFTTT can do automate that, even if the two apps in question don’t have a direct integration.

Qapital was designed to make saving money easy and encourages users by offering various ways to save — its integration with IFTTT gives it thousands of permutations how to do that. One of the most popular recipes on IFTTT’s Qapital channel involves a trigger when it snows. The idea is that when the weather turns white, we may want to finally begin saving for a new pair of skis or a tropical vacation that’s been in the works. If a user has this recipe enabled, money will automatically get swept into a savings bucket when the white stuff starts falling from the sky in the user’s city.

Qapital and IFTTT — Qapital recipes on IFTTT

Another popular recipe for Qapital on IFTTT involves the popular UP fitness tracker made by Jawbone. Users motivated to get in shape can reward themselves when they break a sweat. This recipe swipes $3 to savings toward a spa day, a session with a personal trainer, or new shoes if a user hits his or her daily walking/running goals. Given that IFTTT has more than 200 popular apps available on its platform, Qapital users can create recipes for saving more money connected to how much they exercise, attendance at certain events (IFTTT can use your GPS location as a trigger, so better get to the gym), and how much they read.

Just a couple of years ago, to get this level of interconnectivity, app developers would have to code for each individual integration into 3rd party apps. That means specific integrations would have to be coded within a greater development cycle, often resulting in re-prioritizations, pushouts, and delays. With IFTTT, app developers like Qapital have to make a single integration to the IFTTT platform and IFTTT provides the connective tissue to all the other apps on its marketplace. App developers can also seed the recipe database by creating their own recipes alongside those recipes created by other IFTTT users.

In the consumer space, IFTTT is the largest and most recognized API integrator. Zapier, another platform that interconnects apps, has emerged as a leader for apps targeting business users (think connecting a lead generation form directly to a CRM). Plaid is working in the financial space to create its own APIs for bank data to give tools to developers to connect with existing bank infrastructure (think a turnkey solution to access and authorize new customer bank accounts). In fact, Qapital has partnered with Plaid for its own data access pipelines to US banks.

“Introducing a new banking product is a huge hurdle in terms of trust and putting yourself out there, but millennials are just way more open to new services, and they’re not really expecting banks to pull this off for them,” Qapital founder, George Friedman told FastCompany. “Millennials trust different things. They trust design and they trust the message, which are very different factors than the older generation.”

Photo credit: CarbonNYC [in SF!] via Visual Hunt / CC BY