Saving isn’t sexy, and more to the point, it doesn’t earn banks as much money as spending does–at least in today’s near-zero interest rate environment.
The recent Wells Fargo scandal over unauthorized account openings and the fees that followed them shines a spotlight on a longstanding problem for retail banking: banks benefit (via fee income) from consumer mistakes (late bill payment and overdraft).
Fintech startups have taken up the charge to help consumers save, from companies such as the messaging tool for savings Dyme (a member of Bank Innovation’s sister accelerator, INV Fintech), and Finovate demo company Inspirave. Both are looking to partner with banks to help customers save money. Savings seldom earn much interest these days, which reduces one incentive for the habit.
Inspirave, which trademarked the term “Internet of Savings,” has users set up savings goals and allows friends and family to vote on those goals. When one “wins,” the saving begins–if all goes well. Inspirave’s algorithms recommend savings plans and offer advice, making the service a hybrid savings/PFM/advisory tool.
Why bring family into it? Om Kundu, CEO of Inspirave, said this is a way of getting family invested in the goal, mentally and perhaps financially.
“There’s an old saying, if you need money, ask for advice,” Kundu told Bank Innovation. Friends and family also serve to keep savers invested in Inspirave. “90% of our users have engaged friends and family,” Kundu said. “That’s compared to a low teens percentage of engagement for PFM.”
As the industry has focused on credit problems, Kundu said, savings have become siloed.
“Consumers have their savings with their bank, and with merchants, and the two are blind to each other,” he said. “We want to unsilo savings and make a singular customer journey.”
Inspirave was founded in 2014 with the mission of helping customers save for things that matter, by helping customers think about what they spend money on, and what they don’t. Unhealthy spending, like eating, can often happen unconsciously, and the charge card, Kundu said, is “so easy to use.”
Another problem is that it doesn’t tell you anything about your financial position (unless your transaction is denied, of course). So customers be unconscious, perhaps willfully so, of where they stand financially.
“People don’t wake up in the morning thinking about their financial management,” Kundu said. “They think about their goals.”
But do millennials (or anyone) want to share their financial goals and dreams?
“Tools like Inspirave are based on good ideas — sharing financial goals, and getting friends and family to help meet those goals,” said Ron Shevlin, director of research at Cornerstone Advisors via a Twitter exchange. “But from an execution standpoint, they often require a lot of behavioral changes that will be tough to pull off. If a tool isn’t tightly integrated into a mobile banking platform, or into a site where somebody is already making a lot of purchases (e.g., Amazon) then using the tool becomes one more step for not just the consumer, but the consumers’ friends and family, to make. That’s going to be a tough sell.”
Kundu replied to this after publication that the platform does not relay on behavioral change but rather harnesses behaviors that are already exists at scale.
Inspirave is currently in private beta with an undisclosed number of users. It is a SaaS solution built on Microsoft’s Azure platform and connects to bank systems via API. The company is “primarily bootstrapped,” but is currently raising a round, Kundu said. (The company is consumer-facing, so bank connections are not its priority at present, Kundu added via an email exchange after publication.)
“The industry has focused so much on credit,” Kundu said, because it is profitable. Consumers have learned from this, and are trained to spend. “Frankly, we need affirmative action for savings,” Kundu said.
This post has been updated to relfect commented from Inspirave CEO Om Kundu.
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