Selling SmartyPig to Other Banks
When SmartyPig increased its savings account rate in June, I noticed a change at SmartyPig. In February, SmartyPig announced that it changed its name to Social Money Systems. The reason is that they're trying to attract banks to start their own SmartyPig-like savings program. They call that savings program GoalSaver. I came across this USA Today article today which reviews the company, its founders and its new products:
The company is now starting to sell the SmartyPig concept to banks, with the idea of letting them brand it themselves. That product was rolled out this spring. More than 115 financial institutions have approached Social Money about its GoalSaver program
Many of us may not appreciate the features of SmartyPig such as the social goal saving. However, it's important to understand they're targeting the young generation. Scott McCormack, the President of Social Money, described in this n>genuity article how the banking relationship has changed and what's necessary to engage the Millennials (those who are now between 18-32 years old).
Social Money is making the case that it will be able to help banks attract the young generation and turn them into profitable bank customers. On the Social Money website, it describes ways that banks can make money from this relationship:
- When customers reach their goals they can redeem their savings for a retailers gift card. Social Money describes this as a "cash incentive to the customer and a revenue stream to the Financial Institution."
- The data SmartyPig customers provide can be valuable. Social Money describes how this can be profitable: "Use data to cross-sell products throughout the goal savings process as well as at point of redemption. Example: A New baby goal is an ideal time to offer life insurance and college savings products."
Some may be a little worried about these techniques, but they may help allow the bank to offer a higher interest rate. Perhaps that's the reason why BBVA Compass chose to make such a big rate increase last month. They may feel the customer data will offset the cost of the high interest. It may also point to a downside with SmartyPig. The interest rate may be more important than the goal saving features even for the young generation.
Banks Mentioned in this Post:
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