Behavioral finance underlies much of Digit’s design. Take the goal function, for example: If users get more specific about what they are saving for, research suggests, they are less likely to withdraw the money.
“If an account is labeled 'Charlie’s Education Fund,' I’ll think harder about withdrawing it than if it’s just labeled 'Savings,'” Bloch said. Currently, 70 percent of Digit users withdraw 80 percent of their savings every 90 days, mainly to pay bills and meet short-term needs for cash, to pay off debt, or pay for travel.
“Digit is an easy, elegant product,” said Ryan Falvey, a managing director at the Financial Solutions Lab at the Center for Financial Services Innovation. In 2015, the lab, part of a nonprofit group that supports entrepreneurs looking to use technology to improve Americans’ financial health, launched a competition to “identify solutions that help households better manage their finances on a tight budget.” Digit was one of nine winners, out of about 300 applicants, to get $250,000 and other resources to help develop their products or services. Other winners included Even, which uses technology to create smoother income streams for workers with uneven cash flow, child support app SupportPay, and low-rate lender Ascend Consumer Finance.
Bloch's broadest long-term goal is to make Digit’s user interface far more conversational, to “humanize it” so users feel more in control when they communicate with it.
“We want to make Digit understand more—not as broad as Alexa or Siri, but widen the aperture a little more—related to finances and your money,” he said. “One day, it would be awesome to say, ‘Hey, Digit, am I OK for retirement?’ And all Digit does is send back a thumbs-up emoji."
That kind of complex analysis won’t show up anytime soon. But after a Series B round of fundraising led by venture capital firm Ribbit Capital, Digit’s 22-person team is sitting on $25 million in cash. That, Bloch said, will let the company “be somewhat protected for the next few years in pushing the envelope, largely to invest in product development. The big question for us now is, what more will our customers trust Digit to do?”(Updates amount of monthly savings of digit users and total amount of savings.)
This article was provided by Bloomberg News.