Founders Craig Sweeney and Tom Wondra.
Earlier this year, the United States Federal Reserve made waves with a report unveiling that 46 percent of American adults surveyed could not cover a $400 emergency expense, or would have to borrow money or sell something in order to do so.
Milo Savings, a Chicago-based fintech startup, wants to help Americans build a financial safety cushion with pocket change and push notifications.
The idea behind Milo is fairly straightforward. The company integrates with your bank account and payment cards to round every purchase you make up to the next dollar amount. That money is then deposited into a savings account where it earns interest until it's spent on an emergency, a vacation or another life goal.
In addition to the round-up mechanic, which has been popularized by Los Angeles-based Acorns, Milo will get to know a user’s spending patterns over time and offer suggestions for opportunities to save more money through location-based push notifications.
Founders Robert Schwartz and Justin Seidl.
“It’s a great way to incentivize people throughout the day and help them break habits of spending money on things they don’t need,” said founder Justin Seidl, using a daily cup of coffee as an example. “We can see a pattern of you going to the same location every day… Every so many times we can ping you and say that instead of spending that money today, you can put that away into savings for your vacation in the spring.”
Once this feature is fully built out, said Seidl, users will be able to save the amount they would otherwise have spent by pushing a button inside the app.
These small transactions can add up quickly. Assuming an average of two transactions a day per user, with an average round up of 50 cents per transaction, this feature alone would save over $700 a year for a family with two adults, on top of any other savings they decide to make.
“To our market, to the people who are living paycheck to paycheck, that can be huge. That can be the difference giving them the ability to fix their car and get to work or to pay out-of-pocket medical expenses,” said founder and CEO Craig Sweeney. “It could be the difference between your kids having Christmas or not having Christmas.”
Sweeney said Milo is also in dialogue with a number of employers about offering Milo as an employee benefit with matching contributions, effectively doubling the employee’s annual savings.
To ensure that customers’ data and money are adequately protected, Milo partners with a number of more established fintech outfits. The company uses Plaid and Dwolla to connect to user accounts and make transfers, respectively. Seidl said the partnership with Plaid lets Milo support all major U.S. banks from the get-go. Savings are held by PNC Bank in the customer’s own name.
Milo’s revenues come from a $1 monthly technology fee for private users, plus a share of the user’s earned interest. At current interest rates, Sweeney said, users earn 1 percent interest on their savings while Milo gets one-quarter of a percent.
With a founding team of four split evenly between Milwaukee and Chicago, Milo expects to make additional hires in the next three to six months.
Images via Milo.