Betterment was headed in the direction of added banking functionality… Now, the challenger bank is emphasizing cashflow management as a central tenet of its platform.
A lot of monoline financial firms look a lot like banks nowadays. Rebundling, as we like to call it in the industry, is happening. You don’t need to look further than Betterment, a fintech firm whose roots were as a robo-adviser. The firm has been rolling out more banking functionality…
… Betterment is a customer-driven organization. We don’t like to work backwards from a business model or other motives. We talk to customers, to understand their needs and problems. We also like to observe their behavior — to see what they do and what they don’t do. Then, it helps us to think about the right products to build.
… we launched Cash Flow Analysis and Two-Way Sweep. These monitor the spending behavior in external checking accounts. We make sure that you have enough money in that account to pay bills, but also sweep out as much money as possible to get a higher rate. It was a simple, but powerful product. We saw how much more powerful it could be if we brought it in-house — if we controlled the checking account.
What customers want… They are generally grumpy with their existing financial provider. It isn’t personalized, and sometimes, they feel they’re being taken advantage of. It’s this feedback that went into building our checking account and Cash Reserve, our high yield savings product…
Our move into banking is about pulling all the pieces together, starting with customers and their problems. People would like to have more peace of mind… Giving people peace of mind, so they know they are on track and don’t have to do tons of work to manage their finances.
Our vision is to blur the lines between checking, savings and investing. We want to pull all these facets together so you can ask people human questions and automate the rest. It’s really powerful. You don’t want to ask a person what type of account they want, but it’s the question most incumbent financial institutions ask. Instead, you tell them, here is where you save for the medium term. I want a customer to come to Betterment, set up an account, tell us what he wants to achieve and it’s mostly taken care of.