It’s only been a few short months since automated savings startup Digit opened to the public, but it’s already garnered serious interest from consumers who want more money in their bank accounts, as well as investors who think the service could eventually be a huge hit.
Digit operates a simple platform for helping consumers to save money, by simply connecting to their bank accounts and gradually funneling money into a non-interest-bearing savings account. The service uses algorithms to track users’ spending behavior and moves money into savings in an automated fashion.
The hope is that Digit will put aside money that users’ wouldn’t have saved on their own — but not so much that they’re worried about overdraft fees and other potential financial complications. As General Catalyst managing director Hemant Taneja told me the other day, “No one likes to save — it’s a painful process… But everyone likes savings.”
To keep growing, the company received $11.3 million in new funding led by General Catalyst, with participation from existing investors Baseline Ventures and Google Ventures, as well as former Visa President Hans Morris. The company has now raised a total of $13.8 million, and with the latest round, Taneja has joined its board.
The funding comes just three months after Digit officially opened up to the public after an extensive beta period with early users. The company has seen pretty tremendous growth since then, with its user base increasing by 10x and its savings under management up 5x.
According to CEO Ethan Bloch, users are mostly coming to the service by word of mouth and referrals, although Digit has seen some coverage in the mainstream lifestyle press, as well as among some notable finance bloggers.
But the way they’re interacting with Digit shows the promise of the system: So far, only about a quarter of users have ever withdrawn funds that Digit has set aside for them. And another quarter of the company’s users set aside more money — usually when prompted to do so via one of Digit’s SMS messages.
Digit doesn’t have a mobile app for managing a budget or viewing your balance. Instead, its website is decidedly barebones, and most communications happen with users only through text. Users send SMS messages to view their balance, find out why their checking account balance changed, and also to withdraw or save more money.
While it plans to continue offering the same sort of simplified communications interface, Digit sees itself expanding its services and features to offer new options to users.
For instance, the company is working on creating a compliant way in which it could pay interest on its savings accounts. It’s also considering the ability to add overdraft protection to its suite of offerings. But the ultimate goal would be for Digit to automate all your financial needs, whether it be managing a savings account, paying recurring bills, lowering a user’s debt, or putting money away for retirement.
With new funds in its account and an aggressive plan for integrating its way into various different parts of a consumer’s financial life, Digit could change the way people think about savings, as well as other financial services needs.