Feb 26, 2016
This is one of my favorite episodes we've ever done - my
conversation with Digit founder and CEO, Ethan Bloch.
Digit has set out to solve one of the core problems in
consumers' financial lives - how to save. Their solution is to make
savings effortless, using an intelligent algorithm that analyzes
your spending and income patterns and automatically moves funds
into savings. I had dinner with Ethan last summer and suddenly
realized he was describing an "Uberization" of savings, paralleling
the financial industry's efforts to "uberize" payments, in the
sense of making the mechanics disappear, like the non-exchange of
money at the end of an Uber ride. Out of sight, out of mind.
With Digit, you sign up, and you automatically start to
save.
I had always assumed that getting people to save requires
fostering mindfulness - getting people to think long term instead
of short term. Digit is going in the opposite direction - not
mindfulness, but mindlessness. Again, effortlessness. Instead of
hoping people will form habits that keep them focused all the time,
on saving Digit just lets them decide to save one time. After that,
they save. He's trying to drive the "minutes per year" spent on
saving to nearly zero. No more budgets, expense tracking, figuring
how much you should save and can save and did save. They're
breaking all those practical barriers that keep most people
stuck.
I know it bothers some people to have consumers saving
without thinking. We wish, instead, that everyone would become
financially educated and focus on their life goals - you could call
it developing the financial virtues. There are innovators working
on that approach, too, using behavioral economics to get people
motivated. Still, if the eat-your-spinach approach was going to
work, it probably would have by now. It's time to try new tools. I
know other companies working from the same logic.
And here's an interesting twist. After Digit gets people
started on effortless saving, they actually do switch over to
mindfulness. They start texting their customers about daily savings
progress. And they do it with humor which, as I've been saying, is
a secret weapons of many fintech innovators. They are blowing up
the boredom factor that keeps so many people from focusing on their
finances. I asked Ethan for examples of this. Unfortunately I
didn't get the jokes because they're aimed at millennials, but if
you -- unlike me -- happen to know what's cooler than cool, Digit
will send you this fun
GIF.
Speaking of millennials, Digit's average user is 27 years
old. Some people want to dismiss fintech solutions for this group,
because so many other consumers need tools too My answer to that
is, the millennials are the early adopters of new technology. It
makes sense to start with them. As these products get traction,
they will broaden. Listen to Ethan, and many of our other
guests, and you hear a big vision about remaking the financial
lives of everyone. (And by the way, we do have a show coming up
with Bee, which is reaching for a very different
market.)
At the age of 30, Ethan is at the forefront of the fintech
revolution. Digit is a winner of the Financial Solutions Lab
competition sponsored by CFSI and JPMorgan Chase, which focused its
first year on solutions for the more than one-third of Americans
who struggle with managing cash flow management. (Recall that
another winner was
Ascend - we talked with its founder, Steve
Carlson, in
Episode 9).
Ethan explains how much money Digit has saved people so far
(by the way, we recorded this discussion late last year, so his
progress data are for 2015, not 2016). He explains how customers
are using the savings they build up. He describes their investors
and business model and plans.
And he talks about how to design great financial tools, that
are like smart phones - that people can just pick up and use,
without needing manuals, much less lengthy federal disclosure
documents.
Speaking of those, Ethan really calls out the failures of
disclosures. He also discusses the shift underway toward a more
principles-based approach (echoing our episodes with other guests,
including
Thomas Curry). He describes, too, the huge
obstacles to innovation that arise from well-intentioned government
efforts, including the difficulties innovators face in working with
banks.
Ethan also had the most surprising answer I've gotten yet to
my standard question on how he keeps up with technology
change.
Finally, for our many listeners who play Barefoot Innovation
while you're carpooling to school in hopes it will inspire your
kids to grow up and found the next PayPal, I should say I'm rating
this episode PG-13, for language. Ethan uses a few words in our
conversation that...let's put this way, you hardly ever hear them
on National Public Radio.
Learn more at www.digit.co and @hellodigit and
@ebloch and find further
links below:
- On banks opening up their APIs
- The book "Rainbow's End"
- CFSI's research on the U.S. Financial Diaries
Note to Our Listeners:
If you're enjoying Barefoot Innovation, please be sure write
a review on ITunes and also click the Donate button, to help us can
keep it growing!
Last but not least, I am finally launching my
long-in-the-making video series, Regulation Innovation. It's for
people in the financial world contending with the top two
disruptive challenges - regulation and technology innovation. It
for both business and regulatory people, and for both traditional
companies and innovators. I'll have much more information coming on
this, but please come to www.jsbarefoot.com in
March, and check it out! I promise, there is nothing else
remotely like it.
If you enjoy our work to bring together thought provoking ideas and people please consider a contribution to support the site.
Support the PodcastPlease subscribe to the podcast by opening your favorite podcast app and searching for "Jo Ann Barefoot", in TuneIn, or in iTunes.