Ryan Ruff is 3rd generation in the Personal Finance Management (PFM) industry. His grandfather was a PFM influencer and author with a New York Time’s #1 best seller, as well as founding 2 successful PFM startups. Ryan is a graduate of Startup Ignition (an entrepreneurial bootcamp), QC Fintech and Dan Ariely’s Startup Lab at Duke University (a Behavioral Science Accelerator). Ryan’s deep family background in PFM and entrepreneurship along with his training in applying behavioral science to financial decision making gives him the right skill set to lead SpendPal.
Gareth Borcherds is an experienced technology architect and developer with over 10 years of experience and a successful exit in a company he cofounded and led as CTO.
Company Overview (provide a brief paragraph about your company and mission):
SpendPal is a money management platform that leverages proven principles of behavioral science to nudge people into naturally making better decisions with money.
SpendPal is designed in collaboration with Dr. Dan Ariely’s world famous behavioral science lab, the Center for Advanced Hindsight (CAH), at Duke University. With the help of the CAH’s team of researchers and the lab’s generous investment, we have designed SpendPal to leverage concepts such as choice architecture, mental framing and others to create a banking environment that helps people naturally make better decisions with their money. One way we use choice architecture and default bias to reframe how people make spending decisions is to show people what category money will be stolen from if they overspend. For example instead of just showing the user that they only have $5 left in their clothing category we also show them that if they buy the $40 shoes the extra $35 to cover the purchase will be taken from their “Hawaii Fun Bucks!” Seeing a salient opportunity cost in this way gives the user something else important to them that they could spend that money on rather than just focusing on the shoes they’re about to buy.
What is the inspiration for your company?
While working for my father, my directive was to find a budgeting solution for his clients that were overspending. One client, named Karen, couldn’t stop raiding her savings no matter what we tried. Christmas was especially important to her, so she set up a separate Christmas savings account. Interestingly, Karen continued to raid her main savings like before, but she never touched her Christmas money. Her emotional attachment to Christmas naturally stopped her from raiding her special account. I sat down with Karen and had her divide up the rest of her savings into separate savings accounts with nicknames that reminded her exactly why the money in each account was important to her. The result was Karen stopped raiding her savings. I was able to duplicate these results with other clients. From this experience we built SpendPal.
Who is your competition and how do you distinguish your company?:
Our competitors are companies like Moven, Simple, Mint, Ynab and Mvelopes. Our product’s competitive advantage is that we’re attacking America’s paycheck to paycheck problem from a behavioral science standpoint, leveraging principles like choice architecture, default bias, present bias and loss aversion bias. With this unique approach we can create an environment that subconsciously nudges users into naturally making smarter decisions with their money. For example, present bias makes us irrationally place too much value on things we get right now and not enough value on things we get later. I.E. choosing 1 marsh mellow now instead of 2 marsh mellows in 10 minutes. By helping our users come up with fun creative names for their categories like “Hawaii here we come!” instead of “vacations/trips,” users get a mental picture of themselves walking on the beach in Hawaii when they look at that category. It turns out that visualizing yourself spending the money in Hawaii can trick your subconscious mind into feeling like Hawaii is something you’re experiencing right now in the present. This triggers your Present Bias to value your Hawaii money on a more level playing field with other things that you really could spend that money on right now.
Our business strategy competitive advantage is that we’re strategically partnering with many small credit unions and banks that can’t afford to build tools like SpendPal in house. Partner banks and credit unions can allow their customers to use the SpendPal web or mobile app to manage their money on deposit in their checking account (savings account integration coming soon). By partnering directly with the financial institutions we’re able to offer real time connectivity that can’t be offered through third party services like MX or Plaid. Direct integrations are also much more secure and stable than connecting to the third party aggregators (MX, Plaid) As we sweep up the long tail of the credit union and community bank market, we can perfect and prove out our product. This will put us in position to win the large contracts with larger institutions as the market matures and moves away from traditional checking accounts to what we call Category Banking and Category Accounts. People these days don’t write checks, and they don’t want their money all lumped together in one place. Because of this we believe that the idea of a “Checking Account” is on it’s way out. Category banking and category accounts are new names we’re coining for traditional “checking accounts” that allow you to store your money in separate categories like we’re doing with SpendPal.
What is your connection to the Carolinas and why do you operate here?
North Carolina has been amazing to SpendPal. We have participated in incredible accelerators here, including the QC Fintech and The Startup Lab at CAH | Duke. QC Fintech helped us get deep industry connections and shape our business model. The Startup Lab helped us use proven principles of behavioral science to create the best personal finance management tool we possibly could. The ongoing support and networking opportunities we get from our mentors and advisors has kept us engaged in the Carolinas.
Recent Accomplishments and Challenges (share with our audience how your company has made recent progress) What is Next?…
Companies like Venmo and Stripe, built by industry outsiders, are just the tip of the iceberg. Massive changes are coming to the financial industry. We firmly believe that open banking and Payment Services Directive 2 compliant technologies are the future. The financial institutions that are going to stay relevant are the ones that learn how to thrive in an open banking environment which will more closely resemble a fintech application marketplace than the current silos where the bank retains full control over their customer’s financial lives. We want to be a part of shaping the future of personal finance management which is why we’re partnered with an innovative core processor, CUProdigy, that is nimble and willing to think outside the box, allowing us to build and test what the future of banking could look like. In July 2018 we launched SpendPal with our first 2 financial institutions. We’ll be launching our direct to consumer product in August 2018. We’re excited to be in the right place, with the right partners at the right time to create something magical that will make the world a better place.