Why Digit Should Be Unnecessary

American Banker published an excellent story earlier this month titled Fintech Seeks to Help Customers Avoid Overdrafts – with Assist from a Big Bank. It got me thinking ...

For those of you unfamiliar with Digit, it is a savings app that analyzes your spending and automatically saves “the perfect amount every day” so you don’t have to think about it[1]. It seems to be a brilliantly executed app that gets rave reviews. To assuage user fears about overdrafts that may result from saving too much, Digit offers low balance protection and even overdraft reimbursement if Digit saves too much and doing so results in an overdraft fee to the consumer.

I have no beef with Digit. My discomfort is with why Digit exists in the first place.

We have apps for saving, apps for spend tracking, apps for P2P payments and apps to tell our friends what we spend on and elicit their reaction. We have credit card apps, crowdfunding apps – and of course, mobile banking apps. Why yet another mono-function app? Because banks are squandering the opportunity!

Why aren’t banks offering Digit like capability within their own apps? It’s not just a technology issue.

It is no big feat for a fintech to offer this capability. It’s another thing entirely for a bank to do so – when most banks earn significant revenue from overdraft fees. This kind of personal financial experience carries a hefty opportunity cost. Said another way, banks would have to invest in technology that would erode near-term revenue. Sell that business case to your BoD!

Banks may not be calculating the opportunity cost that results from conceding key components of customer value to fintechs.