Millennials will inherit the largest amount of personal wealth of any generation — and personal finance apps are emerging to seize on this opportunity. Here are the core strategies that these companies are using to build, convert, engage, and monetize their audience.

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An explosion of new consumer finance brands is transforming how people save, spend, and manage their money.

Ninety-two million millennials will soon be in what Goldman Sachs calls their “prime spending years.” In aggregate, they command $1.3 trillion in annual spending. They have a deep antipathy to traditional financial institutions.

A host of startups have emerged to capitalize on this trend. These companies are making it easier to make a budget, invest, and buy stocks, as well as to get loans and credit cards.

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The secrets of user growth

To build a successful personal finance management tool, it’s important to understand the dynamics of user acquisition and growth.

Building a product that people want is hard. It’s even harder when your target market would rather never think about what you’re trying to sell them — retirement, for example. (Bankrate found 83% of millennials don’t think they’ll ever retire: they simply “don’t think they’ll have the money” to do so.)

The result of getting your product right, however, can be exponential growth so fast it’s hard to wrap your mind around.

We studied 8 of the fastest-growing personal finance startups of all time, including Robinhood, and dove into what they did to achieve their massive results.

Below, we’ll show you:

For three of the tools we looked at — Mint, Level Money, and Check — we studied how their product evolved all the way up to their acquisition (by Intuit, Capital One, and Intuit, respectively).

Daily bill payments from Check’s mobile app reached over $1M in daily volume in just one year.

For the non-exited companies — Robinhood, Acorns, Stash, Credit Karma, and Qapital — we looked at which finance apps had the highest rates of user growth and what’s driving expansion.

In each instance, we tore apart the UX and UI of each tool, looked at their growth and revenue numbers, pored through interviews with founders and early employees, researched their public reception, talked to employees, and did our own math.

What follows are the results of our analysis — six secrets to success in the world of personal finance management.

1. How to use pre-launch marketing to build both trust and hype

In personal finance, building trust over time is essential. Whenever you’re dealing with personal financial information and decisions, “moving fast and breaking things” isn’t advisable for any product.

The best personal finance startups take time to lay the groundwork for their product.

They create content that helps them make a name as an authority in a space, giving them the credibility they need to convince people to trust them with their data.

They build up hype and excitement, building up their public reputation and the all-important factor of social proof.

For personal finance tools, pre-launch marketing is where you lay the foundation of your product.

Mint — How blog posts helped Mint get 20,000 customers pre-launch

Mint has a classic success story. Many fintech companies out there are trying, very literally, to become the next Mint.com.

While all the companies we’re looking at have had large exits, none were faster at getting to theirs than Mint.

Of the tools we’re looking at, plus a few other high-profile acquisitions in personal finance, Mint had by far the most significant growth in its valuation — from $0 to $170M in just two years.

Behind that fast growth was an ingenious pre-launch marketing campaign. By creating tons of content around their mission to help people get their finances in order, Mint was able to build the top personal finance blog on the internet before it ever launched its product.

Mint still drives thousands of visits every month from people looking for budgeting templates and budgeting spreadsheets. Among their top traffic-driving keywords, you get “monthly budget template” (5,600 visits), “monthly budget spreadsheet” (3,600 visits), and “household budget template” (2,900 visits), according to Ahrefs:

According to Business Insider, the traffic Mint got from its blog when it launched was already greater than the traffic Wesabe, Buxfer, and Geezeo were getting combined.

While Mint was still getting ready to launch, founder Aaron Patzer’s team started seeding interest in the product through the then-emergent practice of content marketing.

Google Trends data shows that both inbound and content marketing, at the time of Mint’s launch, had hardly been studied.

Mint’s team called it a “content network” at the time. They wrote blog posts, conducted interviews with well-known personal finance speakers, designed infographics, and generally created whatever kinds of content they thought would succeed with their target audience of mainly young professionals looking to better manage their finances.

Then, they spent an equal amount of time working on distributing that content both through social media (Reddit, personal finance forums) and through SEO (which wound up driving about 20% of Mint’s overall traffic).

Reddit is notoriously intolerant of anything that smells like content marketing, so Mint’s ability to consistently get highly upvoted content on high-volume subreddits like /r/todayilearned is especially impressive.

The content Mint created for SEO was made based on various keywords they’d identified as high traffic: “budgeting,” “spending plan,” “financial management,” “save for college,” “how do credit cards work.”

The content Mint made for social was painstakingly designed around getting attention on specific websites. Founder Aaron Patzer told journalist and entrepreneur Shane Snow that his team spent large amounts of time on sites like Reddit and Digg, looking at the kinds of content getting the most upvotes and trying to simply emulate the most successful pieces.

Every time someone hit a piece of Mint.com content, whether from Google or Reddit, they saw a box where you could sign up to get on Mint’s waiting list. This call-to-action was on every single page of this “content network.” And it worked. 20,000+ people signed up to try this “free personal finance solution.”

The value prop of Mint’s signup list was simple — you can tell that we’re trustworthy, and that you know what we’re doing. Wouldn’t you like to use a product that we build?

Not only did all this content get people visiting Mint and signing up for its newsletter, it got them thinking about Mint as a trusted source of financial information.

Like NerdWallet is today, Mint became an authority in the space — a reputation that allowed it to overcome some of the inherent difficulties in being a personal fintech company that relies on people sharing their financial information.

Mint’s ability to get signups using viral, high-value content was one great strategy for acquiring customers pre- and post-launch.

Robinhood took it to another level, getting to 1 million interested users pre-launch with an ingenious referral program.

Robinhood — Building a waitlist of 1M+ people with a referral priority program

It’s been a while since a personal finance tool has grown as quickly as Robinhood. The app, known for free mobile stock trading, hit 1 million active users in a year — and today Robin Hood is at over 2 million, adding about 140,000 new users every month.

That’s “more accounts than E-trade added in all of 2016,” according to TechCrunch. And Robinhood has had 17% month-over-month growth in (paid) premium Robinhood Gold accounts.

Part of this success was the fact that Robinhood had a million users waiting to use its service before it even launched.

At the core of Robinhood’s extreme growth — besides the central value prop, free trades, which we discuss in the next section — was its referral priority program.

A referral priority program, when properly set up, can spark a much higher than usual amount of sharing.

It works like this: you join Robinhood’s waitlist. Like in any other line, you start off at the end. But you’re offered a deal — invite a friend to join the waitlist behind you, and you will move up in line a few spots.

The more people you refer, the faster you move up.

Allowing users to “cut” by referring other users was an innovative idea, and it worked.

The psychological power of the referral priority program is that people’s desire to move up (and thereby share) has no inherent limit. As long as people want to get to the front of the line and the line is long enough, they will continue to share until they run out of friends to send the link to.

By allowing their users to essentially act as sales agents, Robinhood was able to dramatically expand the reach of its referral program.

This marketing campaign seeded all of Robinhood’s subsequent growth:

Between Robinhood and Mint, we walk away with two great strategies for acquiring users. Now that you have those users, how do you get them to stick around?

That comes down to demonstrating value. Quickly.

The next successful strategy personal financial management tools have deployed is all about making the first experience magical.

Let’s dig in.

2. How to show value during the first-run experience

Keeping users around is hard: according to Localytics, the average mobile app loses 80% of its users within just three days of download.

Source: Andrew Chen

This tells you that not only is making your value clear to users paramount, doing it quickly is even more important. Get them engaged quickly, or you will not have another chance.

The top 10 apps in the Google Play Store differentiate from the next 50, 100, and 5000 based almost entirely off how well they retain users during that first 3-day period.

The best apps retain about 70% of users after three days. The next-best retain about 60%. And so on.

In other words, mobile products are under the gun to almost immediately show value to their users.

This is particularly important for personal financial management tools, which need to overcome a user’s natural reluctance to allow an app to tap into their financial data.

They need to show their users how helpful they can be during the first-run experience while asking for a bigger commitment in the form of:

trust

bank accounts

debit & credit cards

income information

social security number (for tools like Robinhood and Credit Karma)

That’s tough to overcome, and is why building a smooth first-run experience is such a challenge (and opportunity) for personal finance apps.

Credit Karma — Use free tools to bring 5.1M visitors from Google every month

On a monthly basis, Ahrefs data shows that Credit Karma drives 5M visits worth a total of $10.9M in impressions.

More than 30% of Credit Karma’s 5 million monthly site visitors don’t come to Credit Karma for the main product, which is aggregated access to short-term loans — they come for the free tools.

The #1 landing page for Credit Karma is its homepage, with 69.2% of all entrances, according to Ahrefs data. But most of the other top pages are for free Credit Karma tools and content.

They come to the Debt Repayment Calculator to calculate the amount of interest left on their debt. They come to the Credit Score Simulator to see how their credit score might change with a hard inquiry.

These free tools have become a significant driver of both traffic and user acquisition for Credit Karma. “It took us five years to dispel the baggage that came with our business model,” founder and CEO Kenneth Lin told First Round Review. “We had to invest in tools explicitly to turn this around.”

The success of Credit Karma’s free tools has a lot to do with the way information is generally structured and searched on the web.

When people have a problem, they Google it. Tools that help people fix those problems or answer their questions will drift up to the top of the search results.

If that problem is prevalent enough, this can mean a tool gets found in thousands or tens of thousands of searches every month.

Being at the top of the search results for a term builds credibility. People trust Google’s algorithms, so it follows that you wouldn’t be at #1 unless you knew what you were doing.

Over time, these tools build up credibility (even more so when they become the first, second, or third result in Google), and this can lead to upsells.

Credit Karma has a variety of free tools on its site, all designed to provide a very specific type of value quickly:

Credit Score Simulator

Debt Repayment Calculator

Simple Loan Calculator

Amortization Calculator

These simulation tools and calculators have a layer of value that is accessible to anyone coming to Credit Karma for the first time, but Credit Karma also offers another, deeper, data-driven layer of value that’s only accessible if you become a Credit Karma user.

The Credit Score Simulator, for example, lets you run through a wide variety of situations and how they might change your credit score.

Only with an actual Credit Karma account, however, can you analyze your historical credit report and see, for example, how your score might be different if you hadn’t made all those late payments:

These tools simultaneously serve two purposes:

They answer simple questions that millions of people have about their finances

They show the value that Credit Karma’s full product line can offer

Their success is tied to how well they perform in search, and historical SEO rankings tell us that relatively soon after these tools were built (2012), Credit Karma was ranking near the middle–top of the first page of search results for some huge related keywords like:

loan calculator : 823,000 monthly searches

: 823,000 monthly searches debt calculator : 9,900 monthly searches

: 9,900 monthly searches car loan calculator: 550,000 monthly searches

It’s clear that 2012 is also when we start to see the beginnings of serious user growth at Credit Karma:

Each one of these tools showed prospective Credit Karma users (and financial product customers) a small slice of the value the service could offer them.

“It can seem counterintuitive that features that don’t generate revenue could be your greatest competitive advantage later on,” founder and CEO Kenneth Lin said. “We’ve built credit simulators and tools to dispute credit report errors even if it didn’t bring in money because we wanted to drive habitual engagement with the site.”

When you get users coming back to your product on a regular basis, you get more opportunities to show them what you can do.

For Credit Karma, an app that has no natural retention “hook” or sticky moment, the free tool is a powerful way to make stickiness happen.

Mint had a more internal mechanism for showing that value — an algorithm that took a user’s financial information and sorted and categorized it upon first use of the product.

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Mint — How it returned 100+ lost hours to users on their first open

Much of Mint’s early success can be tied to a very simple product innovation. The first time you logged into Mint, you could pull all of your financial transactions from your bank, including your credit and debit cards — and you wouldn’t need to spend an hour meticulously tagging each one to see your spending habits. They would be automatically categorized.

Mint eliminated those 100+ days of work and thereby offered a far better first-run experience than Quicken or Microsoft Money could.

Mint is a great example of making an impression on your new users by automating a series of steps they would normally go through manually.

Level Money, on the other hand, shows that you can produce the same kind of impression in a more direct way — by asking a few simple questions.

Level Money — A 3-question onboarding flow can produce instant valuable feedback

Level Money, a budgeting app for millennials and Business Insider’s “best app for managing your money,” was one of the most popular financial management apps before it was acquired by Capital One in 2015. At the time of acquisition, it had 700,000 users and had processed about $12 billion in transactions since its launch in 2013.

The key to Level Money’s user experience is that it gets people to offer actionable information about their personal finances their first time using the product.

Often, loading up a new personal finance app means dealing with tons of permissions and passwords, followed by being dumped into an unfamiliar dashboard that it takes days or weeks to feel fully comfortable using. It can take a while to begin really getting value out of it. Level Money’s first-run experience is designed to show you that value right away.

It works in 3 parts:

After you connect your bank account, Level Money app goes through deposits to your bank account and figures out which represent your recurring income. The app then goes through different withdrawals from your bank account and figures out which represent your bills and other recurring expenses. Finally, the app asks you how much you want to save each month.

When that’s finished, you’re sent to the main dashboard of the app.

The main dashboard of Level Money then uses income vs. expenses to show you three bubbles representing the amount of money you can still spend today, this week, and this month if you want to accomplish the goal you set out in #3.

Within a few minutes of using the app for the first time, in other words, millennials using Level Money can have an answer to a simple question that’s always on their minds: “Can I go out tonight or will I go broke?”

That kind of specific utility, matched to a precise idea of the product’s intended audience, is critical to success.

After users download an app and get through their first-run experience with it, the effectiveness of its design and how well it works for them personally is what comes into consideration.

The best personal finance tools are designed very intentionally for a specific use case or kind of user. Let’s dive into some examples.

3. How to design for the specific user you want

When the Stanford psychologist BJ Fogg gauged people’s reactions to various websites and asked them what factors played the biggest part in their assessments, design was unanimously the most commonly-cited reason for trusting or not trusting a particular site.

Perhaps more surprising, when he went industry-by-industry, it was finance that brought up the most design-related comments.

Design matters in fintech because design is central to a website’s credibility. Design can build up trust or break it down very quickly. It can burden users with excessive information and friction that ruins the user experience.

Personal finance in particular presents some difficulties that make design all the more important. When you use a banking app or budgeting app normally, you need to authenticate yourself, sync up with your bank account and various credit cards, enter personal information (including SSNs, DOBs, etc.), and otherwise input quite a lot of data.

Turning that into an easy consumer experience is both the PFM design challenge and a massive PFM design opportunity, as the best tools in the space prove.

Robinhood — Get millions of millennial customers by using white space in your design

In 2015, Robinhood became the first fintech product to be awarded the prestigious Apple Design Award. The mobile app is clean, uncluttered, and features one of the smoothest stock portfolio views out there. But most importantly, Robinhood’s app design mirrors the needs of its specific market.

The Robinhood app engineering teams value user experience above all else.

Simplifying the trading interface and revamping the user experience of buying and selling stock has allowed Robinhood to connect with their millennial market (the average age of a Robinhood user, according to Fast Company, is just 28) and turn novices into traders. That’s due in large part to design mistakes made by Robinhood’s competition.

Even though one in five millennials exclusively use phones to connect to the internet, according to comScore, virtually all of the stock trading apps on iOS and Android look like they’ve been ported there as an afterthought — not designed specifically for the mobile form-factor.

These interfaces are packed with information — enough to easily lead to information overload. Real-time streaming quotes and in-depth technical indicators are important for day traders, but they’re not necessary for the passive trading majority.

In fact, while these features add value for those who need them, they make the apps harder to navigate and use for those who don’t. Robinhood’s goal was not to build an app for day-traders or portfolio managers; it was to build an app for the first-time retail investor.

“We’re making investing accessible to young people. Most stock brokerages out there have been around for 30 years, their interfaces are clumsy, and they’re targeting older professionals and active traders,” co-founder Vlad Tenev told TechCrunch. “They’re no place for first time investors and that’s one of the things we focus on. Making it accessible. Having it be mobile friendly.”

To make stock trading accessible and mobile-friendly, the Robinhood team stripped information away and built a dashboard that would give just the right amount of information:

Rather than a long list of technical indicators, Robinhood’s app shows you:

the current value of your account

the amount your account’s value has changed by

one piece of news regarding your account (above, an order confirmation)

Swiping to the right allows you to see your account’s value on weekly, monthly, and longer timescales. Scrolling down allows you to check out the value of your various holdings, and dig deeper into their historical performance. For those used to Snapchat and Instagram, it’s a familiar mechanism.

But the most prominent difference between Robinhood and finance apps like Stock Trader is the reliance on white space:

Martin Krzywinski’s Image Color Summarizer shows us that 90% of Robinhood’s app is solid white, while Stock Trader’s palette contains relatively high percentages of several different shades of gray.

White space improves reading comprehension by up to 20%, helps users understand the relationships between different UI elements, and directs users’ attention.

It’s in short supply in trading apps packed with information. Robinhood uses 1.79x more white space than Stock Trader to focus its users’ attention on their account balance and its rate of change over time.

By clearing away all the information a user doesn’t need, Robinhood makes its app legible and makes trading easier for its users to understand. That’s especially important when trying to capture a market like millennials — who by and large haven’t traded before, don’t understand why they should, and don’t know how to start.

Visual design is crucial, but heavy use of white space isn’t the only way to enforce minimalism in product. For Check (formerly Pageonce), creating the best product possible meant chiseling away features that had outlived their usefulness and crafting a leaner, nimbler app.

Check — How narrowing its features made Check worth $360 million

When Kevin Systrom and Mike Krieger realized that people were mostly using their Foursquare-clone app Burbn to take filtered photos, they spun that feature off into its own product and called it Instagram.

Similarly, when Pageonce realized that many of its features were being beaten by other products, it honed in on one that wasn’t: mobile bill pay. And as Check worked its way up to a $360M acquisition, what started out as an aggregator for various web services — from social to shopping — became a mobile app dedicated solely to paying your bills online.



Mobile bill pay usage volume spiked, hitting well over $1M a day by the time Check was acquired by Intuit in June 2014.

Daily payments volume on Check’s platform at the time of acquisition was well over $1,000,000.

The original Pageonce was a prototypical Web 2.0 account aggregator.

You could use it to check your MySpace feed (yes, MySpace), monitor your stock portfolio, get emails, check whether your flight was on time, and see what bills were due and when. The idea was that people wanted one place to do all of these things.

That made sense on the web, where you have a lot of screen real estate and could easily navigate between different sites. On mobile, however, you trade real estate for focus.

Apps started to emerge that were rapidly unbundling the services Pageonce offered:

Many of Pageonce’s services couldn’t compete when more specialized apps started entering the marketplace.

As these specialized apps started to siphon off Pageonce’s users, the team tried to narrow their focus. They looked at how their users were actually using Pageonce and found that most of their active users were using Pageonce primarily to pay their bills and track their spending. They rebuilt their app around financial management, releasing Pageonce Personal Assistant on an early version of the iOS App Store.

In 2009, the app hit a million users and was one of the top 20 apps in the App Store that year.

A few years later, in 2012, user growth plateaued again. Mint was dominating the mobile financial management space, with a stronger brand and new resources from the Intuit acquisition. Once again, Pageonce was existentially threatened by its competition, and had to do something.

The answer came in zeroing in on the one feature that Pageonce had that Mint didn’t: bill pay.

The Pageonce team once again rebuilt their app around the one feature where usage was growing steadily — this time, bill pay — and eliminated everything else. The theory was simple: people could use Mint to manage their budgets. If Pageonce’s bill pay was the best out there, people would continue to use it.

Shortly after the team once again cut their app’s features, Pageonce broke out of its growth plateau and hit 10 million registered users:

Mint — How Mint used the color green to convert more potential users

When it comes to sensitive personal information and the internet, people don’t necessarily behave rationally. They follow the cues in their environment. If your sign-in page features broken/missing elements or shoddy, 90s-style web design, people will be less likely to trust you.

As we mentioned, Stanford’s BJ Fogg asked 2,684 people to write about how they assessed the credibility of various websites — design look was mentioned in nearly half of all the comments, significantly more than any other factor.

The importance of design is even more clear in terms of “information design” (how a site is structured) and “information focus” (scope).

“The dominance of design look may be surprising. One might ask, ‘Are people really so influenced by design look and not by more substantial issues?’ The answer appears to be yes—at least in this setting.” — BJ Fogg

Mint’s founding team was well aware of this phenomenon when the app launched. It was 2007, and people were much less willing to hand sensitive banking information to a new internet startup than they are now.

At the time, Lifehacker wrote an entire piece breaking down Mint’s security, noting how hard it was to overcome people’s paranoia about sharing financial information online: “As soon as any web-based financial software like Mint is mentioned, the security watchdogs among us pounce on the comments to let the rest of us know that we should never, ever trust anyone with our financial data, especially our aggregated financial data.”

The New York Times wrote a piece promoting Mint in 2009 and reader reactions were so incredulous (“You gave them YOUR ACCOUNT NUMBER?! Your PIN NUMBER?! Your SECURITY QUESTIONS???? ARE YOU NUTS, OR JUST STUPID???????”) that they had to issue a follow-up, with comments from CEO Aaron Patzer himself, to reassure people that Mint wasn’t planning to steal their identities.

Analyzing the language used in angry reader comments reveals a general preoccupation with security threats and whether Mint could keep personal information safe:



Design emerged as the most important lever Mint could use to create trust. Everything was painstakingly constructed from day one, and user-tested to build trust and credibility. As lead designer Jason Putorti told the First Round Review:

“You can’t just sort of throw something together in a month, launch it, and expect that it’s going to work. A big part of it was just, does it look credible. Does it feel credible? A lot of it’s visual. A lot of it’s being a good copywriter, writing friendly copy, making people feel comfortable as they go through the process … It’s our job really to figure out what makes it trustworthy.”

To see the other side, just look at Mint’s biggest (startup) competitor at the time, Wesabe. Its site was designed according to Web 2.0 aesthetics:





As one Wesabe user wrote, the aesthetic choices didn’t seem to line up with the “Average Joe” market that Wesabe was courting:

“Our first impression from using Wesabe’s site is that it looks as though it was designed by programmers. The tabs, subject headings and tags are all there and functional, but it does not feel as though there was as much thought given to the design, layout or usability. In such a competitive market, with strong entrants like Mint and PNC’s Virtual Wallet, this simply won’t cut it for long.”

Yodlee, one of Mint’s data providers, had their own front-end personal finance tool too, but its design was less consumer-friendly. It was complex, gave a lot of information up front, and didn’t have any easy-to-understand graphs or charts:

The team at Mint realized that they needed to buck the Web 2.0 trend, which was seen as fun and social but not — the all-important factor, in this case — credible. They also realized that people hated using products from Intuit and Microsoft because they were so complicated that you needed a “For Dummies” guide just to get started.

Several progressive UI moves turned Mint into a service that people felt they could trust. Despite the popularity of 2D design at the time, Mint went all-in on 3D tabs, buttons, and box shadows to make divisions clear and keep users from clicking in the wrong place by accident.

The gradients and airbrushing were all tailored specifically to appeal to people’s sense of visual credibility, as were the colors — green, with orange highlights.

Green and orange are complementary colors. They provide a strong sense of contrast when put side-by-side, crucial for Mint’s team. Creating sufficient contrast between values and inputs and making the site easy to navigate and understand visually was very important for creating user trust.

Whether your users know it or not, the color of your website is going to have an effect on how they perceive its credibility and authoritativeness.

Do you want the site that manages your finances to remind you of money, or do you want it to remind you of Flickr or del.icio.us or some obscure social networking app no one’s ever even heard of?

If you want to build a product for people who don’t necessarily trust you innately, then you need to use every tool in your toolbox to create that feeling of authoritativeness and trust.

As Level Money shows us, design can also help you create a product that’s easy to use and lower the barrier for making complicated financial decisions.

Level Money — How Level Money designed for millennials by reducing choice

When you design any product, one of the biggest choices you make is the amount of information that you’re going to expose to your users. Are you building a dashboard, or are you building a single view on a dataset?

This choice is more than an aesthetic one — it’s about deciding who your product is for, what they want to do with it, and the amount of information that they need.

Level Money built a budgeting app that succeeded with millennial users by taking a minimalist stance on all of these questions, simplifying its UX to meet the real concerns of the people in their market.

With the Level Money app, you simply enter how much you make every month, how much you pay in bills, and how much you want to save each month. This is the end of setup — the next screen presents you with the main UI of the Level Money app.

Three bubbles — representing how much money you have left to spend today, this week, and this month — make up the main view of the app.

“I’m a big fan of Level — I use it to track how much I spend on ride-sharing services every month, among other things. And it fills a niche: most official bank apps are ugly, hard to use, and siloed — they don’t give you a sense of your overall financial health,” writes Casey Newton at the Verge.

Only once I tried Level, a new app for iPhone, did I realize that the question I truly cared about was this: how much money can I spend today, or this week, or this month?

“I still use Mint to make sure I’m not eating out too much or having too many drinks at the bar, but Level has taken its place on my coveted home screen, and I refer to it daily. Level isn’t for everyone, but for people with just a few bills to pay per month and a predictable cash flow, there’s no better app for providing clarity on your finances. One thing well? This app does it,” Newton adds.

These reviews tell us that those three bubbles are all that many millennials need or want — for now — while their finances are relatively simple. Especially in contrast to products with fuller feature sets, like Mint:

“Like most budgeting systems, Mint splits things up into too many categories. I don’t care about my clothing or entertainment budgets, because those are things I worry about only after monthly bills, gas, and food,” one Level Money reviewer wrote. “Ultimately, I wanted something simple that would let me know how much I have to spend after the essentials are paid for.”

Information-wise, an app like Mint does it all. It lets you track your investment portfolio next to your credit cards next to your personal loans next to your bank accounts next to your checking account. But about a third of millennials don’t even have a single dollar in savings.



The main navigational dashboard of Mint demonstrates the point — only one of the options represents information about what’s actively going on with your finances right now, while the others represent planning (budgets, goals) or potential future outcomes (investments, ways to save).



If you have a lot of different accounts to manage, then Mint makes a lot of sense.

If you’re among the half of Americans living paycheck to paycheck, then you’re probably more concerned with what you’re able to spend (on yourself, on your family) right at this moment. You’re mostly concerned with the information under Transactions — what you’ve spent, how much you’re supposed to spend, and what the spread is.

The bubble-centric look of Level Money was highly minimalistic for a PFM product, but it wasn’t that way just because it looked cool. It was that way because the team at Level Money saw an opportunity to take the standard PFM design and pare it down to its bare essentials for a very specific market of users with very specific questions.

Let’s look at how the best personal financial management tools monetize their users’ progress so that they can succeed when they help others succeed.

4. Monetize your users’ financial betterment

Products with network effects get better the more users there are. For example, the telephone gains value as more people have phones. Facebook gains value as more of your friends get profiles.

The PFM space has no easy analogy for network effects because its focus is so intimate — you don’t care about other people’s money. You care about your own money, managing it better, and making it grow.

One of the top posts on Reddit’s /r/robinhood subreddit celebrates 100% lifetime returns.

Instead, PFM tools operate according to something more like what you might call “quality of life effects.”

If you start using an app and it helps you improve your life — whether by diversifying your portfolio or helping you find a low-interest loan — then you’re more likely to keep using it, tell your friends about it, and post on social media about it.

The top post on Reddit’s /r/acorns subreddit celebrates a $2,800 gain over two years.

The best PFM tools don’t just help their users succeed. They promote financial betterment and turn it into a flywheel of growth, benefiting from their users’ enthusiasm for improving their finances and even sharing that improvement with others.

Mint — The $2B market opportunity in preferred pricing

Rather than put ads on Mint, founder and CEO Aaron Patzer monetized the service by recommending products to Mint users based on their financial histories.

This required more work than using banner ads, but in the long run it made for a stronger business.

While ads bring revenue at the expense of the user experience, the recommendations on Mint bring revenue and improve the user experience. The more on point Mint’s recommendations are, the more likely their users are to find value in using Mint. So incentives are aligned.

“Mint users have saved 38% more on interest compared to non-users” reinforces the value prop of this algorithm-generated Mint ad.

Mint’s Patzer knew he didn’t want to put conventional banner ads on the site. It wasn’t going to bolster users’ trust in the product to see ads everywhere. And it would be a constant challenge to keep them from hurting the customer experience.

As discussed above, Mint’s defining feature at the time was its automatic categorization algorithm. It was in this algorithm that Patzer found the business model.

“We realized, well, if you can categorize transactions accurately, that’s great, because the user knows where their money is going … But that also means we know where their money’s going,” he said in a speech at Princeton University.

“We can see that you spend $180 on phone, TV, and internet… and that you could get a bundle for $99 that would save you $1200 a year. And Comcast would pay us a sales fee for that lead. So all of a sudden … we had our business model.”

Rather than show conventional ads, Mint decided early on that it would use customer data to offer personalized product recommendations.

It was a business model that made a lot of sense. The product would be free, to encourage as many people to use it as possible. Users would get special deals (“preferred pricing”) when they bought into an offer.

Doing the math on the different kinds of lead generation opportunities Mint could have with its users’ data across different industries, you get about $30 per potential user per year:

Source: LinkedIn

There were 65 million people in America using online banking at the time, and about 20 million using Quicken and Money — which cost $30 – $70. This meant Mint’s potential market size was between 20 million and 65 million. With a potential per user revenue of $30/year, Mint’s market opportunity came out to somewhere between $0.6 billion and $1.8 billion. (Plus, the more users Mint got and the better it got at analyzing their data, the better the app would get at recommending products.)

A few years later, Patzer said that while some of the numbers had been off in one direction or another, the bigger picture had held.

Mint’s example shows how you can build a business model by understanding your users and offering them product recommendations and valuable referrals. Offering a free product and putting ads in it is going to be a far more effective strategy when those ads are actually relevant and helpful to people.

As Credit Karma shows us, this holds just as much for those trying to rebuild their credit and get a loan as it does for people saving for retirement.

Credit Karma — How to build a $500M business helping the disadvantaged

When Credit Karma first entered the market, the only options you had for getting more than one free credit report a year were sites like TrueCredit and FreeCreditReport.com.

With these sites, “free” was a misnomer. At one point, the FTC sued FreeCreditReport.com (and their owner, Experian) because when consumers signed up for their service, they were also surreptitiously signed up for $15 a month in credit monitoring with it.

Credit Karma gave credit scores away for free, and in doing so acquired a user base larger than FreeCreditReport or TrueCredit ever could with their model.

A part of that user base is the vast number of Americans who have bad credit and are actively working to fix it. An entire third of Americans, according to Experian, have officially “bad” credit, or a credit score under 600.

Much of Credit Karma’s growth has been driven by people looking to not just learn their credit score, but improve it.

The American states with the worst overall credit are also, overwhelmingly, the most likely to be visiting Credit Karma:

The states with the worst credit scores in the country in 2006:

Georgia — #7 in Credit Karma searches

Mississippi — #1 in Credit Karma searches

Louisiana — #6 in Credit Karma searches

Nevada — #10 in Credit Karma searches

Texas — #13 in Credit Karma searches

Oklahoma — #12 in Credit Karma searches

South Carolina — #3 in Credit Karma searches

Alabama — #2 in Credit Karma searches

Tennessee — #8 in Credit Karma searches

New Mexico — #16 in Credit Karma searches

People with bad credit are more likely to visit Credit Karma than other sites because:

it’s free and doesn’t represent an additional financial burden

it allows them to see their credit score as it changes from week to week

Credit Karma can offer them financial products that are tailored to their situation

Its products are where Credit Karma really differentiates itself from the traditional credit monitoring sites.

Because Credit Karma has access to so much user data, connections with financial institutions, and exposure to Americans with bad credit, it can offer the kind of products that people in subprime financial situations can’t get elsewhere.

“We talk about this sometimes — what about payday lending, what about some of these other lending instruments where the typical consumer would say, well that’s bad,” founder Kenneth Lin told Fast Company, “But what if you have really poor credit? You quickly realize, there is a group of people that are served by this. It’s sort of Ivory Tower if you’re saying, ‘Don’t do this.’”

This practice of serving underserved communities has become a foundation of Credit Karma’s business model: “There are a lot of families struggling to make ends meet,” Lin says. “To the extent that we can help save $50 or $100 — a month, a week, a year — that’s valuable. And we can make a business out of it, which is great.”

Similar to Mint, the company was founded with the free model in mind — better to get users and use their data to make money than to limit your audience by charging a fee upfront.

A similar strategy has been used by the team behind the personal finance app Qapital, which aims to differentiate their product by helping users do more with the money that they save.

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Qapital — Why Qapital is building an all-in-one PFM suite

The conventional wisdom of building apps is to do one thing and do it well. Users have more or less infinite room for apps, but little to no patience for those that don’t do their jobs well — so it’s best to pick a niche and own it.

In personal finance, however, this rule becomes more challenging to follow, because you’re helping users with something that they don’t necessarily want to share across many different apps: their money.

While Qapital is primarily an app for helping users save money, it’s building a moat against competitors like Acorns and Stash by expanding its feature set beyond saving.

The core idea behind Qapital, as with many other tools, is to make saving a more frictionless process by deducting money automatically from a user’s account upon certain actions or milestones. Since its 2015 debut, Qapital has grown to 1.3M users, largely on the power and flexibility of its different rule-based investing triggers.

Rather than simply rounding up the fees on transactions or depositing a set amount of money into your account every week or month, Qapital allows users to set up advanced rules with conditions for when money will be saved.

For example, you could deposit a certain amount of money every time you spend money on Starbucks or McDonald’s, or every time you come in under a certain amount of spending on one of your guilty pleasures. You can reward yourself for walking a certain number of steps or logging a certain number of workouts with your Apple Health app, or create any variety of triggers yourself (powered by the platform IFTTT, or If This Then That), such as:

Save every time the temperature rises above 75 degrees

Save every time you post a picture to Instagram

Save every time you pin a new goal to a Pinterest board

This customizability around saving triggers is intended to help users set up psychologically motivating saving goals. It’s the same kind of psychology as impulse buying — if you can make it more fun and spontaneous to save than spend, then it follows that people will save more.

Investing, like Qapital’s other features, takes place in the context of goals: a user’s determined objectives are used to adjust their basket of ETFs and associated risk portfolio.

Qapital is also planning a retirement product to roll out in the later part of 2019, as well as a wealth management feature for enterprises to offer to workers as a benefit.

By expanding its core products, Qapital could upend the offerings of companies like Acorns and Stash, by offering more flexible, creative rules that would trigger people to save money. But that doesn’t mean Qapital’s success is guaranteed.

To compete, Qapital needs a way to offer users value on top of the money they’ve already saved — so that jumping ship looks less appealing. It needs to convince its users that it can offer more than just another place to park cash.

To do that, Qapital is taking its flexible rules system and building on top of it with a collection of features designed to let users use the money they deposit into Qapital better. Options for allocating saved money include:

Investing (in different ETF portfolios)

Adding money on a Qapital debit card (using saved money as the funds)

Paying bills

“Payday Divvy” (a feature to earmark portions of your paycheck for different goals and expenses)

Setting aside taxes (for freelancers)

Now, not only can you save your rainy day fund in Qapital, you can get your paycheck directly deposited into your Qapital bank account so you can spend money on your Qapital debit card. Using your own rules and budgets, you can ensure that you keep your spending under control — literally, because you’re using Qapital’s card — and deposit the rest back into your savings. And you can take a predetermined amount of that money out every month and deposit it into any number of ETFs, allowing you to take more or less your entire financial life and compress it into one app.

While the conventional wisdom of mobile apps may be to unbundle, Qapital is growing fast by going in the opposite direction — and in doing so, offering users a more convenient experience and a more powerful platform for saving.

Robinhood — How Robinhood launched crypto and got a million new users in days

The 2013 launch of Robinhood was a major internet event, with a waitlist of more than a million people signed up to use the product before it was ever released.

The 2018 launch of Robinhood Crypto was no different.

At launch, the product had a million users on its waitlist, and Robinhood’s user base shot up from 3 million to 4 million people — even though the app was only released for use in California, Massachusetts, Missouri, Montana, and New Hampshire.

It was a shot across the bows of companies like Coinbase (20M users worldwide) that have established themselves as early incumbents in the cryptocurrency space.

One factor driving people to Robinhood Crypto — and away from other cryptocurrency products — is the same thing that’s driven millennials to Robinhood’s main stock trading product for years: no fees.

In comparison, Coinbase — the most popular cryptocurrency wallet on mobile — charges a graded fee based on the size of your transaction:

$0.99: buying/selling at $10.99 or under

$1.49: buying/selling at $11.00 to $26.49

$1.99: buying/selling at $26.50 to $51.99

$2.99: buying/selling at $52.00 to $78.05

Many cryptocurrency exchanges charge a percentage fee, from something like 0.1% (Binance) to 3% (Cointree) to anywhere between 0.65% to 3.65% (Uphold).

Those exchanges typically need to draw some kind of profit from cryptocurrency trading—hence the fee—but Robinhood, because of its profitable stock trading business, has opted not to.

Robinhood CEO Vlad Tenev is upfront about the fact that he intends for Robinhood Crypto to be a break-even component of Robinhood’s business at best:

“We don’t intend to make very much money on it at all for the foreseeable future,” he told Fortune. “We intend to operate it as a breakeven business… The thinking behind that is what we’re really doing is building an ecosystem. Right now the products are investing products, so crypto slots in very nicely alongside the 10,000 plus other instruments that people can trade.”

The company does, however, expect that offering a no-fee crypto trading experience will bring a lot of new users to the Robinhood platform.

“We expect by the end of the year to be either the largest or one of the largest crypto platforms out there,” says Tenev’s co-founder Baiju Bhatt. “We also really feel we’ll have the absolute best experience for investing in crypto as well.”

Those users who come to Robinhood for free crypto trading will link up their bank or debit account to start trading, and when they do so, Bhatt and Tenev are betting that more than a few of them will opt to buy some stocks as well — or maybe try out Robinhood’s new options trading platform.

In the end, while crypto may not be the be-all end-all of Robinhood’s business, offering a no-fee trading experience may serve to dramatically expand the size of Robinhood’s user base even further—and bring fresh blood into its other, more profitable lines of business.

It’s easy to assume that in PFM, it’s always better to go after a higher net worth user base. But Robinhood has been able to tap into a much larger market by making products free and offering them to more people.

5. Productize personal responsibility

The internet, as Twitter co-founder Evan Williams says, is not a utopia: it’s “a giant machine designed to give people what they want.”

Opportunities are found where you can give people what they want better or faster than others. Uber got people from point A to point B faster. Google got them information faster.

The PFM space is one where there are a lot of wants not being met by providers. Americans want:

Better credit, but they don’t know how to get it

To start investing, but they don’t know how

To save more, but they feel incapable

The central stumbling block, much of the time, is human psychology:

Present bias leads us to systematically overspend on short-term goods rather than put our money towards the future

Cognitive inertia stops us from doing obvious things like signing up for investment accounts when there’s too much friction/forms involved in the process

Scarcity bias leads us to spend more when we decide that we’re going to go on a budget

When more than half of all Americans can’t afford a surprise $500 expense, it’s clear that the existing solutions for solving this crisis have failed.

That’s why PFM tools are so powerful — they can help people overcome these cognitive biases by changing how we think, automating and amplifying good spending habits. Most importantly, they can make it as easy as downloading an app.

Acorns — How the app does 17x the trading volume of Fidelity

Acorns is a financial planning app that makes it easier to invest your money. You can invest lump sums or set up recurring deposits, but its primary differentiator is the “Round-Ups” feature.

When enabled, Acorns will take purchases on your linked credit cards and bank accounts and “round them up” to the nearest dollar, investing the remainder into a portfolio of your choosing.

Pay for a $3.69 coffee with your credit card, and Acorns will round it up to $4.00 and put that $0.31 into an investment portfolio.

Micro-transactions like these are a time-tested way to skirt the ordinary human reticence around saving. Apps like Candy Crush tap into this: once you’ve given Candy Crush 99 cents, what’s another 99 cents, and another 99 cents, and so on?

But what Acorns taps into is the positive potential of this phenomenon. Rather than reward you for compulsive behavior, Acorns harnesses micro-payments (and the associated dopamine rush from making them) to help you save.

The classic advice that young people and those who have never invested before get about investing is that you don’t need a lot of money to start. You can get started with “pocket change.”

As soon as you start thinking about pocket change, you realize that we’ve been learning this lesson from very early on in our lives. We’re encouraged to save in small increments, to be frugal, to put every coin we can into a piggy bank.

In a society no longer tethered to cash, the piggy bank is little more than a symbol. But it embodies a desire for simple financial discipline that Acorns is able to not just harness, but amplify.

When you’re investing with Acorns, you can set each round up to multiply by 2x or 3x (so that $0.31 from before becomes $0.62 or $0.93).

So every time you do that pleasurable activity (spend money), your brain releases dopamine. At the same time, Acorns adds your money into your investments.

The two activities become associated, forming a potent feedback loop that lets you harness your natural inclinations towards beneficial long-term ends. Gradually, you begin to associate positive feelings with saving, rather than spending.

Acorns shows us how human tendencies can be bent towards responsible ends. Stash, on the other hand, shows us how a product can simply make it easier to fulfill the responsible desires we already have.

Stash — Add 25,000 users a week by constraining users’ investment options

Stash is one of the newer personal finance apps on our list, but it’s grown fast — of its 850,000+ user accounts, it picked up over 500,000 of them in 2017 alone.

Where Acorns productizes the piggy bank investment ethos, Stash productizes the ethos of portfolio diversification.

Unlike an app like Robinhood, where you have to have a significant amount of cash in your account to buy a share of companies like Facebook or Amazon, Stash lets you invest in buckets of related stocks with as little as $5.

That lets you build a portfolio much more easily than in an app where you must buy a discrete unit of stock like Amazon.

The returns on these funds are much higher and much more reliable (for most) then trying to build a portfolio manually, especially when accounting for retail investor psychology.

Researchers looking at 700,000 stock purchases found that people made systematically poor decisions in how they chose to repurchase previously held stocks, often making intuitive (but ultimately unwise) pickups of individual stock. Investors that trade more often also tend to lose more money, on average, than those who trade less.

Stash encourages you to think long-term about the industries that you believe will make a difference and want to support without letting you to stray too far outside the lines of what’s actually fiscally responsible. It prompts users to think about advances in various fields:

Robotics, clean energy, and aerospace are pretty safe bets as industries — as individual companies, perhaps not. You can lose a lot of money as a retail investor betting on a company in one of these sectors. But invest in an exchange-traded fund (ETF) that holds a variety of aerospace and defense assets, and you could be looking at better risk-adjusted returns.

With a social media-based ETF made up of stocks like Facebook and Snapchat, you might see a similar phenomenon. You’re able to make decisions about what you want to invest in without being dependent on any one company to succeed, and you’re definitely earning more than you would with 1% a year in your savings account.

“Don’t put all your eggs in one basket” may be sensible, but it can turn investing into a chore for someone unacquainted with the markets. That’s why Stash built different baskets into their product, allowing users to easily diversify their portfolios while still investing in areas they’re passionate about.

Rather than investing in stocks, you invest in ETFs—exchange-traded funds, or securities that rise and fall with the value of their underlying asset or commodity.

If Acorns is the app that lets you invest without thinking, Stash is the app that helps you think more intelligently about where you want to invest and learn more about your different options. By opening up the way people think about investing, and yet constraining the options presented to safe investments likely to produce good outcomes, Stash gives users the best of both worlds.

The personal finance app Qapital, on the other hand, focuses less on choosing how to invest your money and more on motivating you to save more of it.

In this sense, Qapital is focused on the psychology of saving — and specifically, using creative rules and triggers to make saving money just as much, if not more fun, than spending it.

Qapital — The behavioral science behind Qapital’s trigger-based investing

Qapital, the personal savings app, is unique among the PFM tools highlighted here in that it hired a behavioral scientist to help the company make its app as effective as possible.

Dan Ariely, Chief Behavioral Economist at Qapital, is a Duke scientist known for his work on choice and rationality. Ariely helped Qapital design several of its features, including the ability to save money every time you indulge in a guilty pleasure — the company’s so-called “guilty pleasure rule.”

Spend more than $20 (or $30, or $50, and so on) on your guilty pleasure of choice, and your Qapital account will automatically withdraw a set amount of money from your linked checking account and contribute it to your chosen savings fund.

On the flip side, you can also enable a rule that will reward you for indulging modestly, triggering a deposit to occur every time you come in under a certain spending target.

The attention to detail that Qapital has paid to the user-facing psychology of the app has paid off.

Qapital launched in 2013 as a personal financial dashboard — essentially as a simpler version of Mint. That first version of the app shut down.

Qapital re-launched in 2015, and Ariely came on to act as the team’s Chief Behavioral Economist shortly afterwards. Ariely introduced a collection of new scientifically vetted features to the product, including the guilty pleasure rule and the concept of “anti-goals” (where money is deducted from one spending category’s budget when you go over budget in another).

Qapital’s behavioral science angle became the app’s calling card, garnering it PR coverage and ultimately $30M in financing in early 2018. Google named it “Most Innovative App of the Year, 2017” and praised it as “a beautiful app for goal-oriented savings.” Fast Company likewise deemed it a “best new app” of 2018. Today, Qapital has passed the 1.3M user mark.

What’s notable about Qapital from a behavioral economics point of view is how it helps users visualize and take steps toward the bigger picture goals that their saving are for.

For Ariely, one of the biggest issues with saving is that we lose track of what we want to save the money for. Saving money now to spend it later is a decision that’s full of friction — but it becomes a lot easier when you can see the bigger picture in each micro-decision. That helps motivate you to keep save more, spend less.

“The most difficult problem is our lack of desire to think about it. You go to the supermarket and you buy and buy and buy. People always underestimate. Even the cashier underestimates. We don’t add up all our costs,” Ariely says. “…the reality is, we live in the moment and we make decisions in a myopic way without thinking about the big picture. [Saving for the future is] really, really hard. So we don’t do it.”

With Qapital, all saving takes place in the context of your goals — one of Ariely’s core principles being constraining choice in the right directions. You’re not allowed to just “save” money in the app; you must save towards a specific goal.

Qapital offers users a wide variety of different rules they can use to determine how and when they save money.

Another thing that sets Qapital apart are the methods of saving it offers. Many apps offer features like rounding up money, but what Qapital offers is a more powerful and flexible means of setting rules and triggers.

While Qapital’s system of triggers and rules may appear indistinguishable from other apps like Acorns and Mint, the flexibility and goal-orientation of Qapital’s system is informed by behavioral science — and it’s helping the app to grow despite fierce competition in the space.

Helping users make better financial decisions can be enough to win over customers initially. But then getting them to recommend you to friends is critical to success.

The best PFM tools supercharge their referral programs by making them all about self-improvement — and apps are exploring this in new, creative ways. Let’s dive in.

6. Turn sharing into self-improvement

Businesses built off referrals have a stronger foundation.

Referred customers convert 3x – 5x more often than your average user, they’re 16% more likely to stick around for the long-term, and they tend to have a 20% higher lifetime value.

Fintech is a space where it can be harder to make referrals happen, however. The progenitors of viral growth through referral, the Facebooks and Zyngas, succeeded largely because their products gained value as more of your friends got on them.

Your budgeting app doesn’t have any such natural incentive. It doesn’t get better at managing your money the more friends you have using the same budgeting app. And you’re not likely to “share” your bank balance or post it to Twitter, either. Your personal finances are personal.

The best PFM tools don’t fight these anti-network effects, and instead turn referrals into a means for self-improvement.

Whether your reward for bringing a friend onboard is Apple stock or a bucket of American defense ETFs, referral bonuses in the PFM space can be a powerful way to demonstrate a product’s value to new users and get them hooked.

Robinhood — How Robinhood drives addictive referral at a cost of cents per user

In a casino, the house always wins. Pull the lever on a slot machine over and over, and on a long enough timescale, you’ll lose. But imagine if compulsive gambling was good for your financial health. Imagine if pulling it brought you assets that would appreciate over time and improve your well-being in the long run.

That’s the model that Robinhood uses for its referral program.

Instead of giving you money when you refer a user, Robinhood gives you a share of stock selected at random from a pre-populated list of options.

For the price of one referral, you can receive a share of Apple, Facebook, Microsoft, or others:

The program was popular on sites like Reddit, where Robinhood users got together to share thoughts on the stocks they received or were hoping to receive for their referrals.

Naturally, the users who got stock others were excited about floated to the top of these threads, confirming for others that valuable stocks were being given away in the program and stirring up a bit of envy.

Looking through these threads, you can see that plenty of the time, the stocks people get aren’t Apple — they’re Sirius, or Groupon, or Zynga.

Like a slot machine, Robinhood’s referral program has you (most of the time) winning small, consistent amounts that are calibrated to be just enough to keep you gambling referring.

If Robinhood is mostly giving away stock in the $2 – $4 range, and only giving away an Apple or a Facebook ($100+) every 80th or so referral, that average reward stays low — about $5 a referral. That cost isn’t incurred right away either, as new users have to wait 30 days to withdraw the money from their account.

Walking through the thought process of receiving a stock reward helps clarify why it would work for Robinhood:

If you receive a share of stock worth $2, you have to wait 30 days and go through the process of linking up your bank account just to get that $2 out; or, you can leave it in and let it appreciate (leaving the door open to further investment).

If you receive a share of Apple, or Facebook, or Microsoft, you can wait 30 days and withdraw the cash from your account, or you can spend those 30 days and beyond letting it grow in value even more.

Receive a share of Apple stock today, and its value could double, triple, or quadruple within the next several years. And Robinhood’s referral program makes you consider this before you choose to take your winnings and cash out.

While Robinhood wants to lure you into trying its product through the psychology of “skin in the game,” Stash looks to surmount the main barrier that people feel when they think about investing: thinking they need a big sum of money to get started.

Stash — Seeding user accounts with $5 to demonstrate the power of exponential returns

Stash founders Brandon Krieg and Ed Robinson knew they had to lower the bar to investing if they wanted to get people to start using their product.

When they talked to potential users, they found that there were two reasons that people weren’t currently investing:

they didn’t know how to get started, or

they thought investing was only for rich people

They built their referral program to address these hang-ups. Each new user that a current Stash investor refers gets $5 to invest in a bucket of ETFs of their choice.

Log into the Stash app, and new users can play around with various models of investment to see what that $5 can become over the years.

With a $150 monthly deposit at 4.8% growth, for instance, that could become $10,000 after 5 years, or $23,000 after 10.

The $5 gets you into the app, where Stash tries to show you what can happen if you stick with investing for the long term.

This addresses another key pain point in getting people to start investing: most people can’t understand exponential growth.

As part of a study into people’s understanding of growth, the psychologists Craig McKenzie and Michael Liersch asked participants how much saving $400 per month with 5% return annually would turn into after 40 years.

The majority said $200,000. The real answer is over $600,000.

McKenzie and Liersch found that people systematically expect their savings to grow linearly, not exponentially. They have trouble wrapping their heads around the fact that compounding growth is the latter:

“People’s failure to recognize the power of compound interest — especially over long periods of time — leads to gross underestimation of future account balances, and by consequence, the cost of waiting to save,” they conclude.

When you get your Stash account seeded with those first $5, you don’t just get the material, short-term benefit of $5. You get a glimpse into what your future could be if you use Stash to invest those $5 for the future.

Liersch and McKenzie found that simply pointing out the implications of exponential growth could encourage people to start saving more, and earlier — and Stash employs a similar strategy to help people understand why they should be investing.

Acorns, on the other hand, helps us see how even a modest, non-viral referral program — optimized with various UX best practices — can be a serious driver of growth.

Acorns — How non-viral referrals let Acorns lower its CAC by 50x

Acorns has raised $70M from the likes of Bain Capital Ventures and PayPal, growing to 2 million active accounts within the span of three years.

In Australia, Acorns pays just $4.50 for each new user account it acquires. That’s far cheaper than your average PFM tool. Today, according to Business Insider, fintech companies are paying anywhere from $300 to $1,000, depending on the lifetime value of their customers.

Meanwhile, the average customer acquisition cost (CAC) for a British robo-advisor startup, according to SCM Direct, is about $234. Even a well-known startup brand like Lending Club still spends about $200 per customer it acquires.

Acorns, at $4.50 per customer, has reduced its CAC by 50x compared to many of its competitors.

Acorns has an amazingly low cost of acquiring customers largely because they’ve tapped into social sharing in a way that other financial services companies haven’t.

Acorns provides strong incentives to share, optimizes the process to make sharing as likely as possible, and ensures that payouts correspond with actually active new users.

If you’re paying $4.50 per customer, an extra 500,000 users from referral means you’re paying a modest $2.25M. If you pay $200 per customer like Lending Club, you’re paying a far-less-modest $100M.

Acorns built its CAC-lowering referral program in two parts.

First, Acorns offers a solid incentive. You get $5 per new customer that you refer. That money gets deposited into your Acorns account and is available for you to start using immediately.

Second, it optimizes the UX around referral and makes it as easy as it can be. Too many companies just tack referral on, assuming that their incentives will do the work of motivating users to actually pull the trigger. But according to research conducted by referral marketing company Extole, eliminating the need to load a new page to refer increases the odds of referral by 4x.

When you arrive at the Acorns referral screen, you have several options for how you can send out your invite code. Each works completely inline — no separate landing pages, copying and pasting, or wonky referral code systems to figure out.

When you hit the Message option, the very next screen is an auto-filled text message that lets you send your link to your friends. If you hit the Twitter button, an auto-filled tweet pops up in-app.

Making it slightly easier for users to share may seem like a small optimization, but every little bit makes a difference when it comes to referral.

In addition, by only offering the referral incentive to those who actually begin depositing money rather than just sign up, Acorns can save significant costs while encouraging users to become active on the app.

More than 600,000 new users have started investing on Acorns in the last seven months. If Acorns spent $10 on each new customer it acquired rather than just those that deposit money, it would spend $6M on its next 600,000.

If it only pays out to users who’ve converted to paying customers — assuming they do so at about a Dropbox-quality rate of 4% — then it only spends about $24,000 to acquire those 600,000.

Acorns isn’t throwing away millions on its referral program just to grow its user base. It’s counting on referred users seeing the value in the product and actually starting to use it.

The future of personal finance apps

The next generation of high-growth PFM tools aren’t going to be built according to a formula. The specific tactics that worked for the apps highlighted above aren’t going to work for all the tools to come — tactics and user tastes change too often.

However, the core strategies that these companies used to drive traffic, convert users, keep them engaged, and monetize their audience are not flashes in the pan. They’re fundamental to building products that people want to use.

This report was created with data from CB Insights’ emerging technology insights platform, which offers clarity into emerging tech and new business strategies through tools like:If you aren’t already a client, sign up for a free trial to learn more about our platform.