Beginning this week, automated savings app Digit will start charging users $3 a month

In April, automated savings startup Digit announced that in 100
days it would begin
charging $2.99 a month
to people using its service to set
aside money for a rainy day or help pay their bills. Well 100
days have almost passed, and it’s almost time for those changes
to go into effect.

For Digit, the switch to charging a monthly subscription fee
represents a big change for its business model. The
company previously made money off the aggregate interest from
savings it held on behalf of its users, but made the decision
early this year to pass that interest back to users and charge
them monthly instead.

In making that decision, Digit CEO Ethan Bloch told me the
subscription fee model more aligns with the company’s values
than making money off ads or becoming a lead-gen engine for
financial products most of its users don’t need.

While some users complained when Digit sent its initial emails
about the change, the service continues to grow pretty rapidly.
Earlier this spring, Digit announced it had helped its users

save more than $500 million
in total since being founded.
In just about three months since then, that amount has
increased to more than $700 million.

“We lost less users than we thought we would with that first
announcement,” Bloch told me. He acknowledges, though, that
it’s still too early to tell how things will shake out once it
starts taking $3 a month out of people’s savings. “Candidly, I
think we’ll know a lot more in August,” he said.

Digit began reaching out to users again today to remind them of
the change, emailing them three days before the first $2.99
charge appears. The company plans to follow up with a text
reminder again the day before it charges them, and will also
send an email receipt the day that they’re charged.

If that sounds like a lot of communication over a relatively
small charge, it’s because Digit wants to err on the side of
transparency. After all, a lot has been made of Digit’s change
in business model, perhaps because the app was initially
positioned as a free savings tool.

When I first discussed the change with Bloch months ago, he
said the company decided to start charging users after “it
became really clear that Digit is something people would be
willing to pay for.”

Then the question became, “What is the right price for this
service?” Bloch noted then that Netflix and Spotify are both
$10 a month and HBO Now is $15 a month. In comparison, $3 a
month seemed cheap.

But if you’re trying to help users save money, charging them
anything will always seem anathema to some people. On that
point, Bloch argues that charging users $3 to help them save a
hundred or more a month still leaves them ahead.

“When we run our user studies, what comes up again and again is
that even at the lower end, if you save $1000 in a year, that’s
$1000 you didn’t have beforehand,” Bloch said. “There’s not
enough empathy for that. Some people don’t understand [our
users] just saved $1000 for the first time in their lives.”

Furthermore, Digit is not just about saving for a
rainy day anymore. The company introduced a feature called “Goalmojis”
earlier this year, which allows users to set savings goals for
vacations and other one-time purchase events. Users can also
use goalmojis to help them set money aside for recurring bills
they have monthly.

Nowadays about a third of new users set up goals or monthly
bill savings within 30 days of signup, and Digit is looking at
ways to increasingly automate their financial lives. Of course,
as it does so, the company believes it will provide more value
to those users paying $3 a month.

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