Analysis Featured

Savings by mobile app – an upstart bank without being one

Rize is an online savings-app focused on Millenial.  All the funds held within Rize are SIPC insured up to $250,000. The popularity of the app is on the rise, with more than 5000 sign ups in the last 2 months alone.

Rize is a sort of an upstart bank account that pitches itself as being built for a more technologically savvy generation. Rize major users emerge from 22- 28 age category who earn close to $30- 45K per annum. Millennials are entering a time when they are seeing their buying power grow along with a need for a wider array of items. They are buying houses, starting families, building new businesses, etc. All these activities require money. Rize enables them to analyse how much cash they should be saving, helps them choose smart financial goals and most importantly automates saving by shifting money from their checking account after each payday to their Rize account. It allocates the monies to the user’s financial goals, pushes them to save more and educates them about relevant money matters.

According to research reports, 80 million Millennials are saving nothing. Imagine young Millennials living a life without a safety net or any kind of financial planning for the future. Rize is just the right platform for the digital generation across the world. An exclusive tool targeted at the Millennials, it enables online savings built around automated behavioral design.

Secret Sauce

The start-up’s secret sauce is helping users visualize their goals and incentivizing them via peer comparison. Strong social pressure is built when you see your friends saving more than you. The baby boomers rat race concept is being inverted on its head by healthy competition encouraged through Rize. The app’s aim is to help users save before they spend, once the money is out of sight from their checking to Rize account, the thought of spending that money just won’t emerge. The young fintech company has been able to push its users towards a saving rate of 10%; compare it to the average savings rate of -2% and it helps us understand what Rize is trying to address. In fact, the user base also has responded with 40% signing up for an emergency fund. This highlights that the knowledge is there, they just needed a financial tool to help them execute the process.

Business model

Rize has a very simple business model. It is not looking to monetize anything so early in its life and has left it entirely to the users to pay as much as they want. They are working on a contribution model, where the user decides if they feel that the app has been helpful and if they would like to pay anything for the service.  Savings can be withdrawn at any time and as many time as one wants, for free of cost. It is a regulated company and just like a Registered Investment Agents (RIA), they will charge brokerage and deals in short-term savings which earn interest. This underlines the second and most probably their major revenue stream. When the app becomes the first choice for savings, the start-up will have the ability to influence a lot of choices for its users. Its platform will become extremely lucrative for financial companies looking to push their services. More importantly, the targeting opportunities are enormous; if the user has saved for a house, he will be shown advertisements featuring loan options from a bank or a marketplace lender and the listing of a local agent to help the user buy his dream house. This curation will be a win-win as the user will only see relevant advertisements and the advertiser will look in to cash in on a predetermined intent to buy their service.

Company history

Rize is based out of San Francisco and Washington D.C; it was launched in December 2015 with a seed capital of $125,000 from 500 startups. Rizeup.io was founded by individuals who have a lot of successful start-ups under their belt. Justin Howell, CEO has a degree in Psychology from Harvard and has been a dedicated entrepreneur – co-founded and worked at several startups (TripUp, Project Avocado), also acted as an advisor to numerous other early-stage companies, including as an investor and board member. Rishi Kumar CTO, he was senior Director of Audience Intelligence before he decided to team up to start Rize. Kirk Voltz, head of design holds a degree in Design from Virginia Tech . He is also the co-founder and creative director for Bronx Brewery. Mizel Djukic, head of product was a senior product manager at Millennial Media and was part of two successful startups (Pixel and Paper design LLC). The company is a team of four and is in private beta currently.

Funds security

Rize uses state of the art security, personal information of all the clients are anonymized, encrypted, and securely stored.  As mentioned above all the funds held within Rize are SIPC insured up to $250,000. These features are necessary to ensure that user feels safe while using the Rize account.  It is currently working with over 2500 banks and credit unions all around the United States; soon they will be providing international features too.

Future of savings

According to a recent study by Card hub, the average household credit card debt is now at its highest level since 2008. Even more alarming is that many people have no savings at all. In fact, almost 30% report having a zero balance and 62% has less than $1,000 in savings. According to a survey by GOBankingRates.com, an additional 21% report having no savings account whatsoever. With all this alarming statistics, Rize can become the best birthday gift from a parent to their millennial child. The important thing for Rize is to differentiate itself from the numerous savings app in the market. The ability of the algorithms to nudge the user into saving will be the key success factor.

Author: Heena Dhir and George Popescu

George Popescu
George Popescu

 

About the author

George Popescu

Serial entrepreneur.

George sold and exited his most successful company, Boston Technologies (BT) group, in 2014. BT was a technology, market maker, high-frequency trading and inter-broker broker-dealer in the FX Spot, precious metals and CFDs space company. George was the Founder and CEO and he boot-strapped from $0 to a $20+ million in revenue without any equity investment. BT has been #1 fastest growing company in Boston in 2011 according to the Boston Business Journal and the only company being in top 10 fastest in 2012-13 as it was #5 in 2012. BT has been on the Inc. 500/5000 list of fastest growing companies in the US for 4 years in a row ( #143, #373, #897 and #1270). After the company sale in July 2014 until February 2015 George was Head-of-Strategy for Currency Mountain ( www.currencymountain.com ), a USD 100 million+ holding company focused on retail and medium institutional currencies, precious metals, stocks, fixed income and commodities businesses.

• Over the last 10 years, George founded 10 companies in online lending, craft beer brewery, exotic sports car rental space, hedge funds, peer-reviewed scientific journal ( Journal of Cellular and Molecular medicine…) and more. George advised 30+ early stage start-ups in different fields. George was also a mentor at MIT’s Venture Mentoring Services and Techstar Fintech in NY.

• Previously George obtained 3 Master's Degrees: a Master's of Science from MIT working on 3D printing, a Master’s in Electrical Engineering and Computer Science from Supelec, France and a Master's in Nanosciences from Paris XI University. Previously he worked as a visiting scientist at MIT in Bio-engineering for 2 years. George had 3 undergrad majors: Maths, Physics and Chemistry. His scientific career led to about 10 publications and patents.

• On the business side, Boston Business Journal has named me in the top 40 under 40 in 2012 in recognition of his business achievements.

• George is originally from Romania and grew up in Paris, France.

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