Imagine you're walking into Bloomingdales, your shopping weakness, when your smartphone starts to suddenly buzz. As you pick up the device to make the vibrations cease, a voice message from your spouse says, "Honey, put your cards away. Step away from the register."
You won't have to only envision that scenario for much longer. Cambridge, Mass.-based startup ImpulseSave is working on folding the above capabilities - which it calls Danger Zone - into its eponymous mobile app that encourages consumers to just say no to unneeded purchases. The to-be-born application upgrade is designed to bring "playful fun and delight to our users in keeping their goals and aspirations front of mind," says co-founder and chief executive Phil Fremont-Smith.
To use the existing ImpulseSave features, consumers provide the company with their checking account details to create new savings accounts that are backed by Leader Bank NA, a nationally chartered community bank. In turn, when a consumer has an urge to buy something like jeans, she can tap on her ImpulseSave mobile app and send the amount she would have spent on the item into her savings account instead. ImpulseSave also works through SMS text, the web and Instagram.
"We've armed people with tools that leverage natural instincts to [help them] save better," says Fremont-Smith. "It's such an unlevel playing field and [we] aren't aware of the cacophony of marketing that's targeted to us. ...The truth why [we] aren't saving is that our brain was designed to be good at hunting and gathering - not planning ahead. When we see fruit on a vine, we are hardwired to grab that fruit."
Though ImpulseSave may seem far out there to some, the company claims it's already saving users more than $3,000 annually. The company says that 40% of its users, a number not disclosed, maintain their savings after reaching their goals. As such, "there's an opportunity to introduce longer-term financial products," says Fremont-Smith, adding he's open to banks white labeling his technology. "We have been approached by many banks that perceive us as an interesting way to drive originations and core deposits [while] putting themselves on the customer's side."
ImpulseSave's efforts point to a larger trend evolving within financial services: new spend management and advice tools for mobile devices are quickly emerging that offer consumers actionable insights into their finances before they buy something.
Take Banno LLC (formerly T8 Webware), for example. The Iowa-based fintech company revamped its mobile app for banks, Grip, in September. The app ties location, upcoming bills, historical spending, and other data points together to help show the end-user how buying a sofa impacts his overall financial picture before he purchases the item. Grip includes a number of other actionable functionalities, such as a wish list feature that lets consumers set goals to achieve their desired purchases in the future. The company also wants consumers to use Grip as a resource for choosing which card to pay with.
"Banks need to explain how they save consumers money," says Wade Arnold, Banno's chief executive.
One driver: consumers rarely see the value of their checking accounts, say analysts. People don't perceive value in an overdraft fee of $35, but they might see merit in paying for a bank service that helped them make smarter spending decisions, says Ron Shevlin, senior analyst at Aite Group LLC.
"Banks like to talk about being relevant to customers," Shevlin says. "They need to help their [customers] manage their flow of expenses."
Whether consumers take their banks' advice - that's another story.
"Ultimately, it's the consumer's decision," Shevlin says.
The functionality isn't for everyone. "I don't spend money," says Shevlin. "I don't need a tool to make a smart decision."
But there are some segments were the tools would prove useful, particularly among the less affluent, where short-term budgetary concerns are much greater. Offering advanced budgeting tools would be a way for banks to reach the underbanked population, a segment banks have been trying to reach over the past few years.
Shevlin points to the people who live paycheck to paycheck, where discretionary expenses of $200 to $400 are a big deal, as a population that such tools would benefit. To become reality, though, Shevlin says many personal financial management [PFM] components, including offers available and budget forecasts, have to come together.
"There's so much more to personal finance management than creating pretty charts and graphs," Shevlin says. "I advocate that banks bring all [the pieces] into one cohesive platform."
REASONS TO SAVE
To date, PFM-esque plays delivered by banks through the mobile channel are largely in their infancy, with the exception of alerts. More readily available to bank customers today are ever-evolving online banking tools and programs that incentivize savings, even amid low interest rates.
Take U.S. Bancorp's S.T.A.R.T. program, for example.
S.T.A.R.T, a savings account that offers customers $50 Visa reward cards when they reach $1,000 and another $50 if they maintain the balance for a year, works when customers set up recurring transfers into their savings account. As of mid-September, S.T.A.R.T. boasted $3.4 billion in savings balances.