Not since the baby boomer generation has a single demographic cohort been more sought after by the financial services industry than millennials currently are. A smart, cost-conscious and tech-savvy bunch, millennials are perceived as being almost ruthless when it comes to cutting ties with their bank for a better option. And this has put pressure on traditional institutions to come up with new, innovative ways to attract millennial customers—and even more so, keep them loyal. This is especially challenging as it relates to unexciting, but necessary, services like savings accounts.
And that’s exactly the problem that Atlanta, Georgia-based fintech startup Monotto is solving. A white-label software solution designed for banks to fold into their services, Monotto is designed to make saving money less frustrating (and more engaging) for millennial customers. More than just an automated savings-to-checking application, Monotto’s algorithm analyzes a person’s debts, savings, investments, financial history and designated goals to determine the right amount of automated savings.
Sounds great on the surface, but is Monotto truly poised to be a friend of banks, or is it potentially a foe? Let’s take a closer look and find out.
The phenomenon of users discontinuing certain services at their main bank in lieu of other fintech services or applications has come to be known as “unbundling.” Monotto provides banks with tools to prevent this from happening, specifically with millennials. While it’s true that millennials love to try new apps and services outside of their main bank, statistics also show that they’re four times more likely to use an app they need if it’s offered by their current financial services provider. Monotto enables both banks and credit unions to provide competitive personal finance tools to their customers, therefore decreasing the risk of unbundling and creating a stickier relationship with account holders. But what makes Monotto stand out from the crowd of similar automated savings apps is that its Artificial Intelligence (AI) makes sure that the amount of money being transferred is suitable for that particular account holder, at that specific point in time. If someone is behind on a savings goal, it may automatically transfer more on a particular month. But the AI will also take into account past spending patterns and not transfer so much that it will impact a person’s monthly budget.
This creates a true “set it and forget it” savings experience that automatically adjusts depending upon changing life circumstances. Users can also quickly adjust current financial goals or set new ones. If someone has an urge to plan a vacation to the Bahamas, for example, they can easily place that in the application and have it determine how much more money they need to save each month to achieve that goal. Finally, Monotto’s predictive AI also benefits the upsell and cross-sell capabilities of banks. Based on spending patterns, financial goals and life events, Monotto’s engine can then push and promote highly relevant additional services that are well suited to the individual at that specific point in time.
One of the main hurdles that Monotto will eventually need to overcome is the amount of competition that exists in the automated savings space. This entails both third-party apps that millennials will use to unbundle, as well as those that seek to emulate Monotto’s approach by switching from a business-to-consumers approach to targeting banks directly. Digit, Qapital and Level are just a few examples in the space that perform similar functions. Rather than should a bank partner with one of these services, the question could very well become which program to choose.
Banks will need to familiarize themselves with Monotto’s analytics platform in order to gain an adequate understanding of the return on investment they’re receiving, as well as passing necessary information on to regulatory bodies. Operating on a SaaS model, Monotto does entail an ongoing cost to banks that use its services, rather than just a one-time capital expenditure to build out an application. This means that in order for Monotto to be the best option, banks will need to make sure they are able to engage in a way that allows them to utilize the tool as a revenue generator, rather than just supplying the feature, by identifying potential customers at their time of need for particular, stated, goals and products.
OUR VERDICT: FRIEND
Keeping up with third-party fintech applications can be a tough game for banks and credit unions. Anything that makes it easier for traditional institutions to keep pace is of great potential value. That’s why we’re putting Monotto in the “friend” category. Primarily, Monotto allows banks to offer millennial customers a top-notch automated savings application within their own ecosystem. And more than just another monthly checking-to-savings app, Monotto’s AI is able to understand customers over time and adjust to their specific needs, the main goal being to prevent millennial customers from unbundling and using third-party apps. Bankers should think of Monotto as a way to capture, maintain and grow deposits, find new loan opportunities with its existing customer base and ultimately to decrease the risk of losing savings accounts. Many millennials want to save; they just don’t know how—yet. With Monotto, saving is easy, intelligent, and maybe even fun—if you can say that about a savings account!