This story broke last week and I wasn’t sure how to respond to it. The savings app Digit has decided to charge a $2.99 monthly fee for their service. The service was free so you can imagine there were a lot of upset people. At the end of the day though, Digit is a business. Any business has to find a way to make money. They have to be profitable or the business isn’t sustainable. I understand going from a free app to charging a monthly fee isn’t what people want to hear but it is the reality of life.
There have been many finance apps to come on the market in recent years targeting the younger generations but the question about them has always been the same. Will these companies be sustainable? Like I said above, for a business to stick around it has to make a profit. The biggest issue I see is that they are targeting a group of individuals who grew up with the internet and are used to having things for free. Even if the service decides to sells their user information to make money, nothing directly came out of your pocket but it is still a cost.
I applaud Digit for not going down the privacy invasion route in order to make money. I also applaud them for charging a clear and concise flat fee. Fees like this are hard to find in the banking/investing/finance world. Other companies like Acorn have clear fees too but they focused on a percentage based fee instead of a flat fee. I understand the argument of both. On the one hand a flat fee like Digits’ penalizes small balances and Acorns penalizes people with large balances. Either way, the fee is necessary for the company to stay in business.
It will be interesting to see how many customers walk away and if any new competitors pop up. If competitors do pop up it will be interesting to see what their profit mechanism will be. My guess is we will see a company come around that goes the route of selling customer information and then passes on no tangible fees to its customers. I would much rather pay a small fee to have my information and privacy protected. It will be interesting go see how consumers react and what competitors will crop up.
Even with the monthly fee, I still feel that Digit is a worthwhile product. If you’re struggling to save money and if we’re completely honest with yourself, you’ve never really been able to save money, then Digit could be the perfect product for you even with the fee. If your savings goes from $0 a year to $500 a year, which would be $469.12 after adding the bonus and subtracting the fees, you’re still better off than you were before. You still are ahead $469, which is a much better position than $0.