Startup Hopes to Drive Consumers to Save More

There's no shortage of science behind the impulse buy, which is often prodded by shrewd branding, marketing or positioning in a store. But a new firm is hoping to reverse that psychology by encouraging what it calls impulse saving.

ImpulseSave uses elements of personal financial management, goal-oriented budgeting, social networking and the visually enticing elements of gaming to encourage on-the-fly deposits to a savings account instead of an impulse purchase that the consumer wasn't even going to consider until he or she saw the item in a store. The Cambridge, Mass.-based startup, which debuted on Tuesday after a beta test, provides a site and mobile app that people use to transfer money to a savings account at Leader Bank, an Arlington, Mass.-based institution with about $500 million in assets. ImpulseSave receives a commission for new deposits and hopes to form marketing deals with other firms to operate savings contests.

ImpulseSave wants people to reject opportunities to make unscheduled purchases, and instead make a deposit. The firm is also a real life counter to the idea that digital marketing is persuading people to spend money unnecessarily, a notion that's reached the level of parody.

"I was at my six-year old daughter's soccer game when I got a Groupon offer on my mobile phone asking me if I needed a spa treatment at a discount. That's when it hit me. Even at a kid's soccer game, they can reach me. I can be marketed. Americans are dying a death of a thousand cuts when it comes to spending," says Phil Fremont-Smith, CEO of ImpulseSave.

People download the ImpulseSave app from iTunes or register on ImpulseSave's site. They set financial goals, such as saving for a trip or a wedding, reducing debt or hitting a certain budgetary goal. Each time the person makes a transfer to the savings account, that transfer is noted and is mapped to progress toward that goal. There's an option to see how peers are progressing and there's a social element in which friends can track one another's progress. There are also encouraging messages that accompany the savings and an option to have regularly scheduled automatic deposits. The actual deposits are transferred to the bank account via a mobile or web transfer that's protected via secure socket layer encryption.

The firm has had some early success. Through a private beta offering, ImpulseSave found that the average user is saving about $316 per month, which would be about $3,700 over a full year.

"You have immediate options to save while you are shopping that you didn't have before. And when you save, you get a message back saying that you just saved "x" dollars toward the family vacation, and you've removed "x" days from reaching that goal based on this deposit. You're also told that if you save more this week, you will move up that goal even more…you get an instant response," Fremont-Smith says.

ImpulseSave joins a crowded market of firms that use visual design and calculators to help people budget and save toward financial goals. Bank of the West is among the institutions that has partnered with SaveUp a firm that offers prizes as a lure to save more money. And financial institutions are warming to the theory that gaming — or borrowing elements from digital games that encourage people to make incremental progress toward a goal — can be applied to personal finance.

For the model to work, a lot is riding on the consumer. He or she actually has to decide to save the money instead of making the purchase or just walking away. ImpulseSave hopes to make saving money visually "fun" and part of a social activity. Users can share progress with friends, and ImpulseSave plans to soon launch a Twitter feed. ImpulseSave is also including content on savings and links to blogs and other general personal financial advice sites, and making the savings part of a goal oriented budget.

The firm contends it is not geared toward completely changing behavior, but rather redirecting an existing impulse toward moving money. People are still responding to stimulus, but they're just putting that money into an account instead of making a purchase. Short-term gratification is being replaced by long-term satisfaction. "The prevailing message has traditionally been that if you want to be good with your money, you have to create a budget like a diet and stick to it. That's hard for human beings, our brains are hard wired. While other efforts are geared toward retraining people, we are taking it in the opposite direction, making the option of saving money an impulsive move…as gratifying as spending," Fremont-Smith says.