Qapital, a fintech whose mobile app seeks to impose discipline on users to encourage them to save, raised $30 million this week. The financing was anchored by Swedbank Robur, a wholly owned subsidiary of Swedbank, with participation from the venture capital firm Northzone.
It’s a sign of success not only for the young firm, which started in Sweden in 2015 and now focuses on the U.S. market, but also for the concept of apps that help consumers save, a bandwagon that’s been jumped on by several banks and fintechs including RBC, Goldman Sachs’ Marcus (with its purchase of Clarity Money), Digit, Moven, Chime, Stash and Acorns (the latter two sweep money into investment accounts).
It’s also an example of the “rebundling” trend in fintech.
When fintechs first emerged, they picked off pieces of banking to specialize in and streamline — for instance, online lending, robo-advising and personal financial management. Lately many fintechs, including MoneyLion, SoFi and Stash, have been fleshing out their product lines to become full-fledged challengers to banks.
In August, Qapital added a checking account and debit card (backed by Lincoln Savings Bank) to its savings product (which is backed by Wells Fargo). It’s also beta-testing a robo-adviser it developed that it plans to launch sometime in 2018.
“There’s been a lot of earlier success in disrupting verticals, but it’s all coming back now to how can this be bundled and get something that’s truly different from the banks and truly makes a difference in people’s lives,” said Qapital co-founder and CEO George Friedman.
Saving people from themselves
Qapital lets customers set up specific goals — short or long term — for which they want to save. They can attach images to those goals. Then it takes an “if this, then that” approach to setting money aside.
For instance, a user might set up a weekly Starbucks budget and whenever she comes under it, $10 is moved from checking to savings. Or every time she swipes her Qapital Visa debit card or a linked credit card, $2 goes to the trip-to-Bermuda fund. The automatic savings could be linked to something completely separate from spending, like reaching a daily steps goal on a Fitbit.
Qapital has 450,000 people using its automated savings app.
“People are living more paycheck to paycheck and it’s difficult to change behaviors,” Friedman said. “We have them set very specific goals and help them allocate their paycheck and automate the flow of funds, so you get paid and then it moves it instantly into the right buckets for you.”
Many users are saving for vacation or a rainy day, he said. Board member and investor Dan Ariely, a psychology professor at Duke University, helped design the product.
The checking and savings products generate “a healthy revenue stream” through interchange fees, Friedman said.
The $30 million in new funding will go toward continuing to grow in the U.S. and launching the robo adviser, Friedman said.
The robo-adviser is intended for the 40% of users who are saving for long-term goals like retirement.
“If a goal is three to four years out, that money should not sit in an interest-bearing savings account, it should be in the market to get results faster,” Friedman said.
Qapital Invest will have five portfolios ranging from aggressive, with a lot of exposure to the stock market, to conservative, with mostly income investments. Down the road, Qapital may offer credit products, too.