The fintech startup Douugh, which has built an artificial intelligence engine designed to help consumers regain financial health, and Choice Financial, a community bank based in Fargo, N.D., are teaming up to create a new digital bank account.
The two firms will jointly launch a checking account and debit card with Douugh’s branding and AI-based virtual assistant, which is called Sophie. The $1.2 billion-asset Choice has also invested in Douugh to support the startup’s expansion, which has raised $2.5 million to date.
Douugh, which went live in August, uses artificial intelligence to help consumers reduce their student loan and credit card debt and make better spending and savings decisions. It does not have a bank charter and needs the backing of one to offer deposit products.
“We’re trying to build a smart bank account,” said Andy Taylor, the founder and CEO of Douugh, which is based in San Francisco. “The ability to tack on deposits and issue a debit card is crucial to that.”
Sophie will “run diagnostics” on customers financial positions and be able to do things like make payments, pay bills, automatically save, and track and manage spending and savings goals.
Tim Heilman, chief information officer at Choice Financial, said that Choice’s approach to banking aligns well Douugh’s aspirations of helping consumers achieve financial health.
“To partner with someone who has the same vision and same thoughts about future of banking was really intriguing for us,” Heilman said.
The feeling was mutual. Taylor said that Douugh had spoken with large banks about partnerships, but found Choice to be a better fit.
“We find there are a lot of good conversations that happen, but in reality, do big banks want to change?” Taylor said. “Are they ready to risk cannibalizing themselves and their credit card books? Having a small bank like Choice that’s come from the roots of community banks and still live and breathe those principles is a breath of fresh air.”
Choice has an FIS core system. It’s built the ability to plug in programs like Douugh’s through APIs. The partners plan to launch an iOS app in February.
The next step will be to create a credit card debt consolidation product that “can truly release people from the clutches of compounding interest,” Taylor said.
“The average credit card carries 12 fees, some carry 21 fees,” Taylor said. “We look at that and say, ‘that’s wrong.’ We want to build a product that has a single fee that’s really understandable to the customer. Our goal is to be responsible in how we lend and help you pay it off quickly, not pay the minimum. We’re going to be on a mission to educate customers about just how evil these credit cards are and what they’re doing to society.”
More than 6,000 people have registered for Douugh’s beta program. With Choice signed up, the two companies will be able to start pitching the product more aggressively.
“We’re building a community that will help us curate and co-create and push this out for us,” Taylor said. “There will be a viral element.”