Cambridge-based startup ImpulseSave is opening its service up to anyone today, after a public beta period launched earlier this year. The company provides consumers with a way to contribute to their savings on a whim, in an attempt to capitalize on the kind of behavior that leads to impulse purchases and redirect that towards the more productive end of building up a nest egg.
Tools to help people save are not new, and startups like SmartyPig have set up similar services around the idea that automatic savings plans are the best way to help people squirrel away funds. Banks often offer their own automatic savings programs, too, making it hard for startups to stand out in this regard, since banks cut out the middleman and can often offer better incentives like higher annual percentage yield (APY). But ImpulseSave is approaching saving from a different kind of behavioral perspective, and CEO and co-founer Phil Fremont Smith believes that unique angle makes all the difference between his company and the competition.
“People love to save, they want to save, so why aren’t they? Why are they epically failing at saving?” That’s the question Fremont Smith asked himself when looking at the conundrum of consumer savings, and the one he set out to address with ImpulseSave. “The perspective that I came to is that really the way our economy has developed over the past 25 to 50 years, our ability to transact our money away from ourselves has been so optimized, made frictionless and incentived, that doing something good with your money instead of spending it has literally fallen off the menu,” he said.
ImpulseSave is designed to reclaim some of that incentive to go out and buy things, and employ it to help people save. Users of the service set specific savings goals, like a new car, can set up both automatic savings contributions towards that goal, and also use the free ImpulseSave iPhone app to make spontaneous contributions, whenever and wherever they get the urge to do so. So, for example, if you’re window-shopping at the Apple Store and are tempted to buy a new case for your iPhone, instead you can pull out your device and make a contribution to your car fund, in an attempt to help you get the enjoyment of the impulse buy, with the reward of a wiser investment.
To provide users with savings accounts, ImpulseSave has teamed up with Leader Bank, and offers 0.40 percent APY on funds deposited. It isn’t the best rate in the industry (SmartyPig offers 0.70 percent, for instance), but Fremont Smith believes that the main benefit of ImpulseSave is in its ability to harness impulse saving tendencies, not necessarily its ability to compete on interest rates.
“One of our core learnings from the beta is that, interest rates are so low right now even at the top end, and they will be for the foreseeable future,” he said. “The interest rate is really not the point. The point is that this savings account, and the functionality around it which allows you to impulse save will give you results that you’ve never gotten anywhere else.”
On average, Fremont Smith said that ImpulseSave beta testers are saving between $3,000 and $4,000 per year, which often compares to little or nothing when they were using traditional savings accounts or had no real strategy in place.
ImpulseSave generates revenue whenever a savings account is opened via its partnership with Leader Bank, but the startup also has plans to introduce additional money-making features down the line, like matching funds competitions where a sponsor will match contributions made by one randomly selected individual during a given week. That will help encourage savings activity, by incentivizing larger and more frequent deposits, and give ImpulseSave a chance to sell co-branded promotional opportunities.
Considering the current global economic climate, a startup whose core value proposition is making it easier for people to save is a good idea, and ImpulseSave’s approach is nuanced enough that it stands out from other options out there. The real test for the startup will be seeing if its user base can keep up their good behavior long-term, and making sure there are enough incentives built into the platform to make them want to do so.