Building Consumer Savings with Fintech Innovations

As a buffer against unexpected expenses and a means of preparing for the future, savings are a critical component of financial health. The Financial Health Network’s FinHealth Score® methodology emphasizes the importance of savings for financial health, and research from the Consumer Financial Protection Bureau (CFPB) has found that savings balances are strongly associated with overall financial well-being.¹ In 2021, 39% of people in the U.S. had less than three months’ worth of expenses available in savings.² Some fintech companies have used data and algorithms to develop innovative models that can help consumers build up their savings, while incumbent financial institutions have also evolved their savings offerings to include features like round-up savings. These market evolutions and new models take two distinct, complementary approaches to helping consumers increase their savings: reducing the effort to save and making saving more compelling.

Making Saving Easy

As people navigate the complexities of managing their incomes and expenses, saving can feel difficult – particularly for those individuals whose incomes are not high enough to provide comfortable breathing room after covering expenses. Complex decisions about which bills to pay between paychecks are a common occurrence, and many people also navigate income volatility that makes it difficult to anticipate how much can be put away into savings. These circumstances can result in focusing on day-to-day financial management instead of long-term financial goals, like planning ahead for the future through savings. For people who want to build their savings but can’t decide how much to save, the complexity of these decisions can get in the way of progress toward better financial health.

Savings innovations such as smart automated transfers and round-up savings can simplify the decision-making process around savings. Companies can execute smart automated transfers to savings that are personalized for an individual’s financial situation. These types of smart transfers utilize deposit and payment patterns from consumers’ primary accounts, coupled with real-time data on inflows and current balances, to identify how much money is available for savings. This automates a calculation that can be challenging for consumers to make themselves. 

Fintech companies such as Even and Dave use such calculations of upcoming expenses to display for users how much of their money is safe to spend, helping consumers keep their spending within budget and set aside money for savings. Digit, an all-in-one money app, translates its calculations of a user’s savings buffer into smart, automated transfers that move their money into savings for them. Automating transfers simplifies the process of saving by cutting down on the number of steps that individuals must take to progress toward their savings goals. 

Round-up savings features make saving feel effortless by pairing small savings deposits with spending. When someone enrolled in a round-up savings program makes a purchase, their total is rounded up to the next dollar (or some other small incremental amount above that of the purchase) and the difference is transferred to a connected savings account. Bank of America popularized this practice with its “Keep the Change” program, which has since been implemented by a variety of companies, including investing app Acorns and family banking app Goalsetter.   

Making Saving Compelling

While building savings is a widely shared goal, it may not always take precedence, especially in the face of households’ immediate financial needs. For low- and moderate-income consumers who need to focus on making their incomes last between paychecks, saving for the future may be a lower priority. Stashing away some savings is critical, however, for weathering the sporadic expenses that inevitably come up, such as  medical bills or car and home repairs. To make the act of saving more salient and encourage people to incorporate savings into their everyday financial habits, innovations including prize-linked savings, gamification, and opportunities to contribute to multiple savings goals have emerged.

Prize-linked savings provides people with the opportunity to win money based on their savings behavior. For example, Commonwealth’s Save to Win product, introduced in partnership with credit unions, provides customers a raffle entry for each $25 deposit made (up to 10 entries per month), with prizes offered on both monthly and annual bases. Similarly, SaverLife’s Scratch & Save is a digital scratch card that gives users the chance to win $5 for taking actions like making a deposit to a linked savings account. These programs motivate people with the potential for prize money, even when the probability of winning may be low.³

Gamification can also make the savings process more engaging by integrating game-like elements in a financial product or app. SavingsQuest encourages users to save by tracking their progress, allowing users to earn badges or “level up” as they progress toward their savings goals. Other products aim to make the learning process fun and engaging: Farm Blitz allows users to learn about interest, borrowing, and long-term savings while playing a game in the role of a farmer. As mobile games proliferate, gamified financial apps strive to create a comparable experience that is fun, engaging, and effective.⁴

For many people, their savings serve multiple purposes: making planned purchases, buffering against unexpected expenses, acquiring other assets, or preparing for retirement. When people save for different purposes separately, they are motivated to save greater amounts than when saving into a single pooled account.⁵ Separate savings funds reflect the mental accounts that people keep to earmark money for different purposes, and labeling each bucket of money can serve as a reminder of the end goal of the savings. At many banks, customers can choose a label for their savings accounts and open multiple accounts to reflect their mental accounts. Ally Bank goes a step further by providing the option to create multiple “savings buckets” within a single savings account. Fintech companies like Qapital, Douugh, and Digit also enable users to save towards multiple purposes. 

Digit’s analysis of their user data suggests that both innovations – smart automated transfers and the ability to set multiple savings goals – are associated with increased saving. Digit’s products demonstrate that a system oriented around an intelligent savings algorithm and real-time balance and transaction data can reduce effort for users that want to save. By automating transfers into savings, Digit makes the saving process much easier for the end user, as demonstrated by users’ increased savings after joining Digit.

Fintechs and other financial institutions interested in helping users build savings through digital product enhancements can learn from the innovations addressed in this brief. Digit’s research, highlighted here, suggests that these innovations can benefit users and shows how innovative fintechs can measure their user impact. In particular, they illustrate how easing the process of saving can increase user balances. Financial institutions should consider devoting resources to simplifying saving for motivated users or customers, in addition to making it compelling and helping users prioritize it.

This report uses analysis from Digit, an all-in-one money app that budgets, saves, and invests for users. We are grateful to Anna Thompson and Dan Begley-Groth at Digit for their collaboration.

Many current and former Financial Health Network staff contributed to this work, including Nadia van de Walle, Dan Miller, Michael Salmassian, David Silberman, Hannah Gdalman, and Sarah Austrin-Willis.

The Financial Solutions Lab (FSL) was established in 2014 to cultivate, support, and scale innovative ideas that help improve financial health. FSL focuses on solutions addressing acute and persistent financial health challenges faced by low- to moderate-income individuals, Black and Latinx communities, and other underserved consumers. 

The Financial Health Network manages the Financial Solutions Lab in collaboration with founding partner JPMorgan Chase and with support from Prudential Financial.

The views and opinions expressed in the report are those of the authors and do not necessarily reflect the views and opinions of JPMorgan Chase & Co., Prudential Financial, or their affiliates.