Digit, your personal piggy bank, raises $11.3 million
Between the excitement of their newfound financial independence, and juggling bills like rent, it’s no wonder that saving money is at the bottom of the priority list for young adults.
But Digit, a San Francisco-based startup, hopes to help Millennials save money by automatically doing it for them. The company said on Tuesday that it has raised $11.3 million in new funding, only three months after introducing its service.
Apps like Mint that help people better track their spending and hopefully motivate them to save money have been around for several years. Digit takes it a step further by doing most of the work.
After users link their checking accounts to the service, Digit uses algorithms to track their spending patterns and determine how much money to sneak away into a FDIC-insured savings account. From time to time, Digit sends users text messages to update them about their finances or give them the opportunity to adjust their account settings.
Since premiering three months ago, Digit has saved away more than $1 million of its users’ money weekly, and has grown its user base by 50 times, co-founder and CEO Ethan Bloch told Fortune. He declined to share user numbers as they’re still small when compared to, say, Bank of America’s millions of customers.
Digit is part of a recent influx of apps and online services aimed at young adults that are supposed to make investing easy by automating it. Another one, mobile app Acorns, invests spare change from a user’s transactions into exchange-traded funds.
Digit also plans to eventually address one of the biggest requests it’s received: to let users collect the interest from their savings. At the moment Digit keeps it all as its source of revenue. But Bloch said he wants to share it with users as soon as Digit gets legal clearance from regulators. But it’s not exactly a lot of money. A user saving $2,000 in a year is currently only forgoing 20 cents in interest, he said.
But beyond that, Digit hopes to become its users’ main point of contact for their finances and help them manage other money-related matters like investing.
And speaking of point of contact, Digit doesn’t insist on sticking to texting its users forever. In fact, the service is considering the possibility of fielding customer inquires service through messaging services like Facebook Messenger (which recently announced it will let businesses use it to talk to customers) and WhatsApp, Bloch said.
“If you look at WeChat, they’re light years ahead of us,” Bloch said of the popular messaging app in Asia through which users already connect with some of their financial services providers.
Meanwhile, Digit is considering building a basic app so that users can adjust their account settings from a phone (currently, they must sign up and change their settings from a computer). The company is also trying to refine its algorithms and improve its ability to save just the right amount for each users’ financial situation.
General Catalyst led this latest round, which brings up Digit’s total funding to $13.8 million. Baseline Ventures and Google Ventures, former Visa president Hans Morris, and other angel investors also participated in the round. Bloch founded Digit in 2013 with Michael Murray, Todd Larsen, and Chris Wilson.
For more about American spending habits, watch this Fortune video: