70% of Americans have less than $1,000 in savings.
That makes it really difficult for them to deal with unexpected short-term expenses that may come up.
Trying to build up long-term wealth is out of the question when you're basically living paycheck to paycheck.
MoneyLion's main focus is to help with that.
It's a financial wellness platform that uses technology to transform how consumers think about money.
It's not a platform for the ultra-rich, nor is it for the ultra-poor.
MoneyLion aims to help the biggest segment of American society: the middle class.
Saving money can be hard for those in the middle class.
Most of them have the desire and the disposable income to get themselves out of debt and start saving.
The problem is that they lack the knowledge and tools often reserved for those who are already wealthy.
MoneyLion is improving people's lives by bringing this information to the masses via their app and web platform.
It gives its users actionable insights they can use to turn their finances around.
For example, the platform uses artificial intelligence to identify and notify you when you're spending more money than usual.
Then it suggests helpful ways to turn things around.
Customers can use MoneyLion's platform to learn about great products for borrowing, saving, and investing.
Best of all, MoneyLion specifically tailors these products for each client.
By helping people learn the best ways to manage money and by offering customized products based on individual needs, the company has gained millions of active users in the process.
We will talk about precisely what lead to MoneyLion's success a bit later.
First, let's learn a bit more about their service and how it works.
A leading mobile finance platform that gives consumers the power to take control of their financial lives
In 2013, a group of leading technologists and financiers came together and founded the company to build their ideal financial management app along with a technology-driven lending platform.
They established their headquarters in New York, but MoneyLion also has offices in San Francisco and Kuala Lumpur, Malaysia.
There are plenty of financial management apps out there, so what do I think makes MoneyLion special?
Their platform uses leading-edge analytics and machine learning.
This allows it to gain a full view of each user's personal finances and their risk profile.
The result is better underwriting and the creation of custom-tailored financial product offers.
MoneyLion encourages good financial behavior in its users.
It does this through the use of points, rewards, and endorsements.
According to company co-founder and CEO Diwakar Choubey, the needs of consumers are changing.
They don't just want faster access to personalized credit products. They want it in a seamless digital format.
They also want better tools and data-driven recommendations.
In other words, they want a clearer understanding of their entire financial lives.
MoneyLion does this by combining a number of services.
Guided saving accounts, access to low-cost personal loans, simple investing, and personalized advice and benefits.
Its app includes tools to track spending, monitor a user's credit, and earn rewards.
MoneyLion's primary goal for consumers is to help them build up their credit, gain financial knowledge, and earn their first $2,000 in savings.
MoneyLion offers a monthly subscription membership called MoneyLion Plus.
Some of the benefits include:
Savings. Members must put $50 or more into savings each month.
The MoneyLion app looks at a user's cash flow to determine the best time of the month to set aside money from their bank account.
Members get access to personalized budgeting tips.
These help them improve their spending and increase their savings even more.
Access to cheap credit. MoneyLion seeks to help members avoid unexpected expenses.
They do this by offering loans with an APR of 5.99% or lower regardless of your credit score.
Users can use the money to avoid overdrafts or other costly late payment fees or penalties on credit cards, student loans, auto loans, or other debt.
Cashback.MoneyLion Plus members are eligible for a whole range of rewards.
These include a $1 cashback bonus for every day that a member logs into the MoneyLion app.
That means users who log in every day can earn back the full cost of their monthly subscription and essentially get it for free!
There are other rewards based on your investment account balance as well.
Investment account. Your savings each month get automatically invested in a fully managed investment account.
A diversified portfolio of EFT's makes up these financial accounts.
MoneyLion takes your financial needs and life stage into account when deciding on how to divide your portfolio.
There are never any additional hidden management or trading fees, which is a refreshingly transparent way of providing an investment product to consumers.
Mobile app. Members unlock the full range of services that MoneyLion's app has to offer.
You can see your savings progress, get customized tips and offers just for you and more.
You can even access credit reporting or qualify for a loan with just a few taps.
MoneyLion's data shows that it helps its members save $2,000 over two years.
People who don't have the same support typically only save about $500 over the same time period.
MoneyLion won over 2 million customers by doing three key things
Winning over millions of people to use your app is no easy feat!
MoneyLion's roaring success had nothing to do with luck.
They did a few critical things that led to the massive adoption of their platform.
They picked a niche. MoneyLion took ownership of one target audience and a single business goal.
In their case, this was the financial middle class.
MoneyLion focused on enabling this group to reach their financial goals.
Such laser focus on a very specific demographic meant that all their product features and offerings are coherent with the wants and needs of this particular slice of the population.
They used technology to make things easy. Their platform scaled data exchange.
It turned the journey toward financial freedom into a simple and straightforward process.
You have an incentive to share lots of personal data. In return, you receive many significant benefits.
They made a customer magnet. MoneyLion's customer acquisition model is unique.
You can download their free app, which then links to your various financial accounts.
The platform can then engage with customers in a way that's tailored to their personal needs.
Offering the ability for customers to earn back fees paid for the platform's premium subscription is a stroke of genius as well.
Tapping into the extraordinary power of ONE
So much of today's business focuses around gaining as wide of an audience as possible.
Just take a look at other platforms like Facebook that are seeking to capture everyone, from your best friend to your grandmother.
MoneyLion decided to go the opposite route.
They really narrowed down on a single target audience and one business goal.
Then they took radical ownership of it.
Their focus was the financial middle class.
And they aimed to be the finance company of choice for everyday Americans.
They knew from research that was where the biggest need in the market was.
MoneyLion's typical user is someone who:
- Knows their options when it comes to accessing credit.
- Is conscious of their credit score.
- Understands the effects that certain transactions will have on their ability to afford loans on their house or car.
- Genuinely shows concern about their overall financial well-being.
The people who use MoneyLion, and the future customers they are looking to gain, have upward mobility.
Most of them also have college degrees.
They are looking to get access to financial tools that have previously only been available to wealthier individuals.
Just because MoneyLion chose to specialize doesn't mean they're in a small market.
The American middle class makes up over half of the population.
That's a huge customer base.
Their company also had one business goal.
That was to become a provider of personalized financial insights for users.
In fact, the information a user gets to see is determined by the user's own financial habits.
Additionally, information gets presented in a way that is easy to understand and internalize.
This enables the responsible use of credit, and also provides an overall view of the user's financial life that is both holistic and approachable.
Scaling data exchange and making financial freedom a no-brainer
The team behind MoneyLion had the foresight to see that artificial intelligence and predictive analytics were the future of personal finance.
These technologies would be the key to creating a more financially empowered generation of consumers.
So they set out to gain something from their customers that virtually no other fintech company has been able to manage before.
Information is valuable, and MoneyLion wanted to create a veritable treasure trove of data.
But how exactly could a company convince you to hand over your data to them?
MoneyLion did it by providing strong incentives for customers to trust them with their information.
They created a valuable exchange between a borrower and a lender.
As a borrower, you would get lower rates on credit products.
You'd also get access to them more quickly than you could offline, like by going to your bank.
Lenders benefit from lower principal default rates.
Since MoneyLion focuses on quality over quantity, high-quality customers comprise much of their user base.
The difference for lenders is actually massive.
If you have enrolled in the platform's free credit monitoring service, you're an incredible 28% less likely to default on loans.
When MoneyLion opened up shop, the rest of the financial industry was basically in the dark ages.
Most of their work got done offline.
A number of manual processes also burdened them.
This wasn't helpful in any way to consumers.
MoneyLion revamped their business model using an electronic exchange of data.
They also created the concept of data as currency for online transactions.
It meant letting borrowers share more data in real-time.
Lenders were able to get more comfortable with real-time credit decisions.
This allowed them to move away from having to manually verify credit applications and lots of other time-consuming and labor-intensive back-office processes.
In the Internet age, this is already a concept that many consumers were already getting used to. MoneyLion just scaled it even further.
Consumers have been showing an increasing demand for online banking services ever since the creation of MoneyLion.
They wanted reduced transaction times and a new form of banking that was less intrusive to their busy lives.
Modern computing power proved to be a giant help in this area.
It allowed for analyzing the saving, spending, and investing habits of each individual user.
This made the in-app experience of each person unique.
A financial application built around you.
MoneyLion's goal has always been to encourage consumers to monitor their financial profile continually, and it did this by incentivizing people towards the habit of regularly checking their financial profiles.
Data showed that customers who use financial management tools absolutely make better borrowers.
They pay off more on-time, engage in more sound financial habits, and are less likely to default on loans.
Now you might be wondering what MoneyLion does with all that data.
They use it to help people make better financial decisions by providing powerful insights.
MoneyLion helps their users avoid thousands of dollars in unnecessary bank fees.
The app doesn't just give you a last-minute warning when you're about to incur an overdraft fee.
It also offers early warnings about low balances that cause these kinds of problems in the first place.
If you do find yourself in an overdraft situation, MoneyLion offers small, short-term loans to help you avoid fees.
The company's founder and CEO had this to say:
"We've found that on average, the most financially vulnerable consumers are paying $95 a month in bank fees. For less than the cost of an Amazon Prime membership, MoneyLion offers the comprehensive services of the biggest financial institutions, without the exorbitant fees that prevent consumers from reaching their goals."
They provide access to just-in-time credit to smooth out any financial roadbumps.
And users become more in tune with their everyday spending by seeing all of the data for themselves.
Their platform also provides a powerful simulator.
Users can run insightful "what if" scenarios using this tool.
For example, what will the effect on my credit score be if I pay off my oldest credit card?
You can also see the massive negative consequences that some actions can have on your credit standing, like not paying off for a credit card for three months.
How the platform made itself desirable and enticing to its potential end-users
MoneyLion's value proposition was deliberately made clear to customers.
You download their app and simply link your financial accounts to it.
This can be bank accounts, investment accounts, and credit cards.
You can even include offline assets like jewelry!
The more information you provide, the better insights their algorithms can offer you.
This includes information on how you can save better, or how you can make more money in the future.
These engagement tools allow MoneyLion to build a rapport with the customer.
Then they usually carry on multiple conversations about the user's financial health and well-being.
The app uses notifications and powerful engagement tools to keep in touch with users on both mobile and web platforms.
The free app incentivizes people to share their information to take control of their own finances.
But MoneyLion isn't just about collecting user data.
Data provided can help convert users into customers.
MoneyLion has a premium membership available.
It gives even more financial insight than their basic free service.
User data also drives potential customers to the lending side of their business.
MoneyLion offers free access to your credit score and advice on how to improve it.
That means people enrolled in the service can use this information to figure out how much interest they would likely have to pay on a loan.
The platform provides a robust range of credit card offerings and multiple lenders for users to borrow from if they need money.
Bank partners are eager to underwrite loans originated by the platform.
This is because the user base is full of conscientious people who are proactively looking to manage their financial health.
Three key lessons to learn from MoneyLion
There's a lot that you can learn from MoneyLion's story, even if your business isn't part of the fintech industry.
Many of their strategies apply to any company.
Lesson #1. Diversify your monetization strategy
MoneyLion doesn't just rely on a single way to make money.
Sure, they earn money from their premium monthly membership.
But they do other things as well.
They earn interest income on their loan portfolio. Pretty standard and easy to understand.
MoneyLion gives out loans.
People pay interest on those loans, and they make a profit that way.
They earn commissions by generating leads for partners. When MoneyLion offers you a third party product or service that you decide to take advantage and avail of, they get a percentage of the sale.
People refer to this type of commission as affiliate marketing.
It's a common way to make money online without actually selling a product yourself.
They sell their massive datasets to other leading financial institutions. Okay, so as a consumer you might be annoyed to find out that MoneyLion could be selling your data.
Losing some of your privacy seems to be the price we pay nowadays each time we sign up for a new online platform.
But at least MoneyLion is a bit better than other online platforms that offer free service in exchange for your information.
The data is used to present you with financial products that are personally selected based on your wants and needs.
Lesson #2. Whoever can spend the most on customer acquisition wins
"Whoever can spend the most to acquire a customer wins" is a quote by Russell Brunson, co-founder of the online marketing tool ClickFunnels.
This saying is entirely accurate, but it relies on a pretty big assumption.
Acquiring customers is only valuable if you are able to monetize them and improve their lifetime value.
MoneyLion attracts and acquires new users by providing a free app and free financial services.
That in itself is not making money and is an enormous upfront cost to them.
There are servers to run, services to provide, and a constant flow of new financial insights.
If they weren't able to acquire and convert users into paying customers, it could have easily turned into a disaster.
But they're able to gain a long-term benefit from enough of their users to make it profitable.
Like I mentioned previously, MoneyLion makes use of a bunch of different monetization strategies.
Each one is a way for them to make a bit of profit from users, even if each person doesn't make use of all of them.
But they also improve the customer's lifetime value and give them a reason to keep coming back for more.
MoneyLion quickly becomes a trusted provider of financial information for its users.
That makes them very likely to return for their next financial product purchase.
Providing an excellent first borrowing experience to customers, they set themselves up for repeat loan customers whenever users need to take out another loan in the future.
This gives MoneyLion an industry leading five-year lifetime value on its customer base.
Lesson #3. Never underestimate the power of an incentive
Getting you to give up your personal information to businesses is never easy.
We constantly hear news stories about data breaches and compromised security happening with one major company or another.
This makes us more skeptical about trusting businesses with our information than ever before.
MoneyLion needs a really good incentive to get customers to hand over their data—especially really sensitive data like financial information.
The platform provides people with a way to become more financially conscious.
MoneyLion doesn't just encourage people to take meaningful steps.
It rewards them with gift cards and other items.
Users get rewards for paying their bills on time, meeting savings goals, and taking steps to improve their financial health.
In fact, MoneyLion has issued more than $2.5 million worth of rewards to date.
This doesn't just create loyal customers for MoneyLion's platform.
It also creates smart, money-savvy users that become very desirable loan candidates for financial institutions.
Many middle-class Americans want to save money, but don't know where to start
Lots of us live with a constant fear a sudden unexpected expense, but lack the personal finance tools and knowledge to prepare for it.
While the looming threat of overdrafts and late fees don't make it any easier for us either.
That's where MoneyLion excels.
Their primary mission is to help you improve your financial health and savings.
Their app is a creative way to effect a change in a customer's behavior.
Through incentives, rewards, and bonuses, MoneyLion is able to improve user's financial literacy and turn them into super savers.
By helping middle-class Americans take control of their financial lives, MoneyLion has grown into a massive platform with millions of active users.
I personally believe that the way that MoneyLion and similar platforms have disrupted the lending industry is fantastic for consumers.
It harnessed the power of technology in a way that really empowers people through easy to understand information on credit and investing.
Technology and data allow the platform to provide extremely customized products and tailored financial advice to users.
Now you don't need to pay a financial advisor to receive money advice customized for your situation.
The company picked a niche and made it easy for their target customers to improve their financial situation.
The way that MoneyLion has diversified their monetization strategy means that their customers have extremely long life cycles for the industry.
They found a win-win situation where users benefit from continuing with the platform to gain valuable insights and recommendations, while the platform finds clever ways to monetize most of the steps along the way.
Do you use MoneyLion or any other financial app?
How has it improved your personal finances so far?
Any relevant tips or recommendations you'd like to share with fellow readers?
Let us know your thoughts in the comments section below.