Saving, a Commonly Broken New Year’s Resolution
We all want to save, don’t we? But most of us find this a hard decision to make.
Every month, we do various mental calculations; I have spent this much, I still have to pay this much of bills, then I have this trip, a bit of shopping, a few dinner reservations, a couple of other payments and yes, here is what I will be left with. And now, how do I save this? Where do I invest my money, which account is the best, will I access my savings the moment I need, will the bank charge me and many more similar thoughts may keep our head busy. Then we find this too complicated and decide to think about it next month. And the next month starts with a similar thought process.
Saving would be very easy if there was someone who would analyze all our current spending, calculate upcoming bills and other expected spending by analyzing the trend during the previous months, calculate our free to spend money and suggest us the portion that we can move to savings this month. In other words, we all need a financial coach that knows as very well, thus can think like we do, replicate our thought processes and recommend us how much to spend or automatically save each month.
Creating such an artificial intelligence should be the easiest for banks and yet only a few are doing this. Banks know about their customers’ spending and income patterns the best; they have all the data they need. They know each customer’s scheduled payments for the month, can analyze their average monthly spending from all accounts and cards, calculate the average incoming money and even guess the total spending by the yearend with seasonality effect. Banks can also suggest the best way of saving for their customer by observing the customer’s existing portfolio, average monthly free to spend amount and previous saving habit. It is all about building this intelligence that can analyze the past data and sense what will happen in the future.
Banks can even get smarter if they can run such algorithms real-time and recommend customers how to utilize their money instantly as they spend or earn. For instance, after a spending with card, bank can instantly send me a push notification displaying the new free to spend amount and if I have enough funds, can suggest me to save on-the-go with one click for a similar shopping need for next month. It always feels good to save after spending.
Recently, I have come across Digit, a San Francisco based start-up that helps users to save by analyzing their checking account, spending habits and income trend and calculate an amount to set aside periodically. If the user has more balance in their account compared to previous months and can survive the month after paying the upcoming payments, Digit automatically saves a certain portion for the user. They not only do the thinking for the user but also the saving part as well. It is all about building the correct algorithm that can do the right analysis. The downside of the service is that the users do not get any earnings for their savings. This is simply a smart digital piggybank and will surely get smarter as more user data flows into their system. Banks can definitely do more than just sending out e-mails with promotions on their saving accounts. They need to get smarter and deliver experiences that can naturally be a part of their customers’ lives.