Social Money announced Thursday an API that lets prepaid companies and personal financial management (PFM) vendors integrate goal-based savings accounts into their digital offerings.
"The API provides all of the functionality needed to both initiate an FDIC savings account and manage it," says Mike Ferrari, cofounder of Social Money.
To add such features, companies would typically need to work with up to seven partners, including a bank, Ferrari says. Social Money's API, billed as CorePro, aims to streamline this effort.
A bank partnership, of course, is still required of nonbanks introducing savings accounts, but Social Money handles that relationship. At launch, CorePro deposits are held at Lincoln Savings Bank in Iowa.
As the partnership is in pilot stages, the experience for customers and future customers is still getting hammered out, says Mike McCrary, first vice president and marketing director at Lincoln Savings Bank.
Among other things, the arrangement allows Lincoln Savings Bank to offer customers the next phase of digital banking in a category in need of a makeover. "There are opportunities for a renewed emphasis on savings," says McCrary. "We are a community bank and everything we do is a reflection of that."
The core of banking, according to McCrary, is dealing with consumers' daily, mundane transactions, some of which are driven by plans and hopes for the future. Allowing people to define the goals within their savings accounts should spark engagement. "There was always a goal there," he says. "This enables the customer to input it."
The announcement offers an example of how banks nationwide could rethink their savings accounts, including account opening.
"Banks need to look at disruptions and how they need to respond," says Stessa Cohen, a research director at Gartner.
That includes updates to the way they think about goals within the context of savings accounts.
"Nobody but the bank cares about transactions," says Cohen. Rather, a consumer is thinking, "how do I save up for that refrigerator, given my whole financial picture?"
In other words, goals are basically the financiers' version of an e-tailer's wish list (Standard Chartered even offers a Wish List feature within its mobile app Breeze) and it's the technology Social Money sells.
A platform that makes offering savings accounts easier for nonbanks could challenge the way banks deliver traditional savings accounts.
More bank partnerships are in the works for Social Money, says Ferrari.
Meanwhile, Social Money identifies PFM vendors, prepaid card companies, merchants and startups as likely CorePro customers. Some companies "are looking for ways to incorporate savings for products they are selling," says Ferrari. Other companies may wish to integrate savings to complement their budgeting tools. And all companies are looking for ways to have stickier relationships, which is where the goal-based savings technology comes into play. "Transactional accounts only get you so far," says Ferrari.
Social Money created consumer-facing site SmartyPig and offers consumers prepaid accounts. "We have knowledge and expertise in how savings can make prepaid stickier," says Ferrari. Now, "we're enabling opportunities for others to increase customer engagement through technology we built and valid tested."
CorePro partners are expected to go live in the first quarter of 2014.
This isn't the first time Social Money has made a play to get other companies to integrate its technology. In 2012, SmartyPig partnered with The Bancorp in an effort to resell its goal-setting technology (including CorePro and a Goal Saver tool) to the prepaid card companies that use The Bancorp. Social Money said it doesn't share client or customer information.
The latest announcement widens the pool of companies that integrate the technology. Partners pay about a penny a day per savings account per month.
Social Money's news also points to the need for financial services apps to consolidate in order to simplify the customer's digital financial experience, which has been historically messy. "There's been an abyss between PFM and banking transactions," says Gartner's Cohen.
Making APIs to their platforms available to developers is an emerging trend among financial services providers such as Geezeo, Yodlee, MoneyDesktop and even banks to a limited degree. Capital One, for example, offers several.
Some in the industry, like Cohen, could see the category of PFM evolving so that the data-driven tools help people with their day-to-day shopping, such as sending an alert to a mobile phone when a consumer's purchase of shoes would take him a step back from nearing his wish to fly to Hawaii.
"There's a huge opportunity for banks to help," Cohen says. "It's something they should look at."