By Tanaya Macheel
Tally has launched an automated savings app that lets users earn rewards points for saving, as opposed to incentivizing spending like most rewards systems do.
The standalone app, called Tally Save, is separate from its initial product, a debt management app that automates credit card payments. Tally Save is designed to motivate users to save by letting them earn points they can redeem for gift cards to 50 of the largest U.S. retailers including Amazon, Whole Foods, Target, and Starbucks as well as services like Uber or Airbnb. As the product grows, Tally will continue to add ways for people to redeem their points, Tally CEO Jason Brown told Cheddar in an interview Wednesday.
"There's no place that rewards you for saving," Brown said. "You get that instant gratification when you buy something and also get points, whereas with savings, you put it into this black box and it's going to kick out 25 cents at some point, but it's not really concrete."
Users also have the option to donate their rewards through a partnership with charity: water.
High-yield savings and hybrid cash accounts have recently emerged as go-to customer acquisition strategies for consumer-facing fintech startups, including SoFi, Robinhood, Wealthfront, Betterment and Affirm. A rate of 3 percent or even 2 percent is an attractive offer to many compared to the rates of the top four U.S. banks: Chase (0.04 percent as of May 23), Citi (0.04 percent), Wells Fargo (0.01 percent), and Bank of America (0.06 percent).
"If you have a lot of money, then that's something that motivates you. But most people who have hundreds or maybe $1,000 in savings are just not motivated to get, you know, 20 cents of interest," Brown said. "What is way more important is to make the habit of saving fun and almost addictive so we designed an experience that gives you points for the habit of saving."
The cash-back craze even extends beyond banks and savings accounts: The rewards app Drop, which gives users points for shopping and gift cards to redeem with them, raised $21 million in Series A funding last year, and the banking startup Zero launched its debit card with a cash-back feature. Rakuten, the "Amazon of Japan," advertises its cash-back shopping platform to U.S. consumers as part of the rebranding of Ebates, which it bought in 2014.
Financial services firms tend to have difficulty doing the right thing for consumers' financial health because of the need to do the profitable thing. Many fintech companies, and automated savings apps specifically, caught consumers' attention with free services that provided value to them, but many have begun employing a subscription model to continue the service. Digit charges $2.99 per month for similar automation services to Tally and pays users a 1 percent bonus every three months for saving; Qapital's membership starts at $3 per month but goes as high as $12.
"As we thought about our roadmap to getting to complete financial automation, we knew the first step was doing a really hard financial job for people that's fundamental to helping people build financial health, but also had a strong business model and revenue model attached to Tally so we can have the flexibility to actually innovate aggressively on the product side," Brown said.
The company thinks of its offerings in terms of goal-oriented jobs consumers need to do and uses artificial intelligence to optimize each of those financial tasks, separating the benefits of financial responsibilities from the burden.
Tally makes money through its core product, the credit card pay-off app. It offers a low-rate line of credit that users pay monthly; that payment covers the minimums on each linked credit card. Cash-back and rewards incentives are expensive for financial services firms, but Brown said Tally's savings product is completely free with no strings attached.
"It's all about giving this one job away for free, there are other financial gaps that we'll get paid for, he said. "The first one that we automated, paying off your cards, we get we do get paid for, and we can use that to subsidize some of the financial jobs we do for free. We are rolling out this year and into early next year the next couple of financial jobs that will be automated, and some of those we'll also get paid for. We don't have to make money on every single job we do. But, you know, something like this is truly fundamental to financial health."
Next, Tally will look to help consumers pay down other types of debt next, including mortgage and auto, Brown said. For now, its focus is on helping them pay down debt and build up an emergency savings fund; eventually it could expand into investments, retirement and tax management and payments.
The core Tally app is now managing "hundreds of millions" of dollars and grown 10x in the past year, Brown said. It has a 99 percent monthly retention rate and is now available to more than 80 percent of Americans, compared to almost 50 percent this time last year, based on state licenses, according to Brown. The app is still only available to people with at least a 660 FICO score, but the company plans to expand the service to people with a lower-than-660 score within the next couple months.
"We started with the first automated job of paying off credit cards and aligned the actual revenue model so we only make money when we save people money, and now we've saved people tens of millions of dollars in interest," Brown said. "Now we've really got that automated job nailed, we can then rinse and repeat that as we do more financial jobs for people and help them be better off financially. It's all part of our broader plan to get to complete financial automation."