How We Added Smarts to Funding Your Account
Finding a deposit amount that’s juuust right
We’ve spent more than a year creating Digit Direct Powered by MetaBank®, a bank account with a brain. It’s capable of managing your bills, saving for short term goals, and investing.
Of course, none of this automated money movement is possible if there isn’t any money in a members’ account. Without money, our algorithms couldn’t put anything towards bills or save for a rainy day.
From user research, we found that many of our members — especially those coming from our original savings product — assumed Digit would take care of moving money from their linked account for them.
So we listened, then built a feature called “Smart Recurring Deposits.”
What are Smart Recurring Deposits?
For members with the feature turned on and a linked account — like a checking account from another financial institution — we calculate weekly “smart” amounts to move into Digit. The member is notified about the upcoming deposit and has a day to cancel the transaction before it’s initiated.
Finding Goldilocks
We want to deposit enough into Digit to let the magic happen, but not more than we need to.
The first step was to determine the rules for calculating this “Goldilocks” amount. To do this, common first principles of personal finance were our guide: pay your bills, save consistently and have enough money set aside for the day-to-day.
We look ahead to any upcoming bills and compare that to the balance in your Bills account to calculate a desired withdrawal amount for bills. We then aim to bring your Spending account to a level you’ve set and add a cushion to go towards Savings.
A separate algorithm actually handles moving money between accounts once it’s in Digit, but this at least ensures that there is enough to work with.
In our initial testing, some members reported that the amounts were too large. This was an especially common piece of feedback from those coming from our original savings product, which usually only deposits a few bucks per day, rather than larger amounts once a week.
To mitigate this concern, we modified the algorithm to start small and ramp up. The first deposit would only cover a fixed percentage of the desired withdrawal and was capped at a low dollar amount. That percentage and dollar cap would then increase with each successive deposit until it reached 100% and the overall deposit cap.
But first, do no harm
Now that we’ve landed on our Goldilocks deposit amount, we still want to make sure this transfer won’t break the bank. Perhaps it’d be great if we could get $215 into Digit, but the connected account only has $200.
A simple thing to do would be just to draw down to $0, but that could put the user in a tough position if they had upcoming debits out of that account. An even worse idea would be to just try to make the $215 withdrawal and either get declined or cause an overdraft.
Instead, we want to set a safe upper limit on the Smart Recurring Deposit amount based on the individual’s situation. Our goal is to minimize declined transactions and overdrafts not just for this transfer, but over the next several days.
We backtested various algorithms using the balance histories for our 600k existing members and calculated the likelihood of the connected account going to $0 or below over the next week. We then settled on an approach that minimizes this likelihood while still depositing the desired amount (or is close and still safe) the majority of the time.
Finally, we message members the day before the deposit is scheduled, giving them a chance to cancel the transaction with a single tap. As an added precaution, we check the connected account balance one final time right before initiating the transaction to make sure it hasn’t dropped too much since we sent that message. If it has, we don’t initiate the deposit and then let the member know what happened.
What’s next?
Now that Direct is widely available, more and more members are using this feature. Overall, the response has been positive and we are seeing increased engagement, but the work never ends! We are now seeing heterogeneity in expectations — some members find the amounts too high, some too low, even with the same transfer amount and balances.
Just like Goldilocks, juuust right isn’t always enough. We’ll keep at it. More to come!
Direct℠ is a deposit account powered by MetaBank, N.A., Member FDIC.
