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We would all love to take better care of our finances. But the sad truth is, many of us don’t.
In the past several decades, we’ve seen the average American’s debt skyrocket and savings decrease over of the population. All the while, investing seems impossible financially, too confusing or both. In fact, 47% of Americans are living paycheck to paycheck and couldn’t even come up with $400 in an emergency.
“If half the population is struggling and not being able to live up to their own potential, what does that actually mean for the future of the economy?”
Barratt’s plans with GoldBean are to make investing accessible to the rest of us. Her plan? Use data to build investment strategies we can get excited about and understand.
“When you think of all the trillions I've been talking about (credit card debt, loans, advertising spend) the exponential opportunity of redeploying and rethinking those trillions — what could it mean for our society and for the future?" Barratt asked. "Especially if you can unlock that potential of people who are stressed about money and not living up to their own human potential — what would that mean in terms of less financial stress, more money in the economy?”
We have a huge portion of the population who does not know how to grow their wealth and is undereducated about investing — but with a little help, their money could be invested and they too could be growing their wealth.
So what’s the solution here? Start with what people know. Barratt says we’re much, much more adept as consumers than we are as investors.
If you talk to someone about whether they should buy an index fund, an ETF or a mutual fund — prepare for their eyes to glaze over. But ask them about the difference between Nike and Under Armour or Target versus Amazon, and you’re likely to get a knowledgeable and opinionated response.
Barratt believes that using people’s own spending habits could be the key to helping them learn to invest. In fact, investing with GoldBean is built to be a lot like online shopping — something people have no problem understanding.
GoldBean works by analyzing your bank transaction history and creating an investment plan based on your income and spending habits — specifically the brands you tend to spend money on.
Much like Netflix, GoldBean not only makes recommendations based on your shopping preferences, but their algorithms will also recommend companies similar to the ones you like, as well as the ones your friends and social contacts prefer.
The business model here is that people give GoldBean their data — such as demographics and spending habits — plus a small membership fee and trading fees in exchange for financial services.
“We're seeing amazing things in our data in terms of loyalty. Even if someone only has a practice portfolio....We start to see loyalty shifting within categories. You buy Target, you stop spending so much at Walmart. It's a pretty amazing thing, and it's incredibly interesting for companies themselves,” says Barratt.
Of course, they also need to be good investments, she added. But so far, it’s proving to be a good way to get people to dip their toes into the investing world.
Gathering user data to predict what types of investments users might want to make based on their spending habits is an interesting idea. As Barratt says, GoldBean leverages people’s knowledge of brands to jump start their learning about investing.
GoldBean’s model is part of a larger trend we’ve been seeing for a while now.
With every new digital service we sign up for, we’re giving away information about our habits, our preferences and our desires. From what we search online, to what we buy at the grocery store, to how we communicate with each other — much of that information is often captured and analyzed to target ads or provide other services.
Another comparison might be the quantified self movement in recent years where users willingly record and give over personal data about their daily activities in exchange for a clearer picture of their habits. The idea being you can only change what you can see.
We know that self-knowledge can result in changed behavior. So when we get data back, interpreted in a meaningful way — we can see ourselves in a new light and make positive changes. We might learn more about our health, or we might be able to improve our personal finances.
Exchanging information for a service is only going to grow in the years ahead. But how do we know if it’s worth giving away our personal data? Right now, we might not know. In fact, we will need to set personal thresholds for what we're willing to exchange and what we expect to get back — especially in the case of personal finances.
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