Article part of The Bank is Dead. Long Live Banking.
By Fame Razak, CTO, AnalogFolk
Plum is a personal savings assistant that monitors your spending and automatically sets aside money you won’t need. Launched in September 2016, it was the first AI-powered Facebook chatbot. We asked its growth hacker Joel MacDonald to share the story of Plum’s development, its future ambitions — and what the team would have done differently.
JOEL, WHAT FIRST INSPIRED PLUM?
Most people know they should be saving money and understand the concept of compound interest, but few actually save. Plum’s co-founders Alex [Michael] and Victor [Trokoudes], both Cypriots working in London’s tech scene, were no different. In addition, Victor was employee number five at TransferWise, so he witnessed firsthand the huge transformational effect a start-up can have.
HOW DOES IT WORK?
Users grant Plum read-only access to their transaction data by linking their bank account (we’ve partnered with Yodlee). Plum then analyses thousands of transactions to identify their regular income, rent, bills and daily spend. With this data and other factors including available balance, our algorithm will run every few days and calculate the right amount for them to save. This is then automatically transferred into their Plum savings account via Direct Debit. We message users to keep them updated with their progress and their Plum savings are accessible 24/7.
WHY FOCUS ON SAVINGS?
As we were determining what Plum would be, we kept seeing stories pop up from around the world. Did you know that 16 million people in the UK currently have less than £100 in savings? And real interest rates with banks are now at 0%? People still only want to work till they’re 65 so, with life expectancy growing, that means they’ll need 30 years’ worth of savings to support them in retirement. With all this in mind, we knew what Plum’s direction had to be.
HOW WILL YOU DIFFER FROM THE OTHER FINTECH START-UPS OUT THERE?
Our algorithm is the differentiator. People already know they should be saving their money, they just don’t take any action. We’re doing that for them. We’re putting away just the right amount – money people can actually afford. Saving is just the first step to financial freedom. As Plum matures, we’ll offer investments and then tips and offers to help people reduce their spending.
THERE’S VERY LITTLE YOU CAN DO WITHIN PLUM ITSELF AND IT’S MOSTLY INSIDE FACEBOOK MESSENGER. HOW DID YOU DECIDE ON THE FEATURES AND THE CHANNEL?
There were three key actions we needed to build for – putting money in, taking money out and seeing your balance; anything else and we’d go against our mission of keeping it simple.
Our biggest challenge was deciding whether we were going to build an app or not. We’re all aware of the app download barrier and usage fatigue, so we initially decided to take an SMS approach, since it’s universally accessible without blockers. However, at the time, Facebook began heavily promoting Messenger bots and it made sense for us to be there instead.
HOW DID YOU FIND THE BEST TALENT IN YOUR EARLY DAYS TO DEVELOP AN ALGORITHM AND A PLATFORM ON A CSTART-UP’S BUDGET?
The early development was built by Alex, the CTO, who created the algorithm over a six-month period. Once we were happy the algorithm would work for everyone, we brought in some freelancers to help build the prototype. Now, we have three software engineers who we found through our investors and personal contacts.
We’re lucky we get a lot of interest; I think it’s down to fintech’s popularity and Plum being something that’s cool to work on. Who doesn’t want- to work with and explore machine learning?
WHAT HAS BEEN PLUM’S BIGGEST CHALLENGE SO FAR?
Trust. We have to use data aggregator Yodlee to connect Plum to people’s bank accounts and, for that to work, we need their internet banking login details. People could think, ‘Why would I give my bank details to a start-up?’ We know we’ll lose a lot of people at this point, so it’s a big concern for us.
We put extra work into security, and being recognised at the National Tech Awards has helped with awareness. The press have been really great and receptive to us — we’ve been in The Independent and on the BBC — but our focus is on getting recognised on a national scale outside of the tech bubble.
OTHER THAN THE ALGORITHM AND YODLEE, WHAT ELSE DO YOU USE TO CREATE PLUM?
We also use MangoPay to create an e-wallet for each customer to hold their money. Our tech is all hosted on the Amazon cloud.
HOW DIFFICULT IS IT TO BECOME FSA REGULATED AND HANDLE OTHER PEOPLE’S MONEY?
We aren’t fully FSA regulated, unlike app-only Atom Bank and Monzo, but MangoPay is and we have to comply with its rules. We’re a registered data controller, so we have the Data Protection Act in place. Security is our highest priority, because we know it’s also our customers’ biggest concern.
We do regular penetration tests on our IT infrastructure and we have strict rules in place. All data is encrypted on our laptops, we don’t store files on the hard drives, everything has to be in our private cloud storage, and USB drives are not allowed. All the policies are in place to keep Plum safe. All our staff understand and follow the rules.
WHAT ARE THE PARTICULAR CHALLENGES IN BEING DIGITAL-ONLY?
We love face-to-face customer interaction – we think it’s important, because we’re talking about people’s finances. We have a messenger platform we can do it through, but when you talk to someone in person, you get so much more insight, so we’re trying to put on events every fortnight where users can come in and tell us what they think of the product so far. We push them for good and bad feedback. You could lose that connection in digital-only, but by keeping your community engaged, you can make it work. Traditional banks going digital don’t necessarily appreciate what they’re losing. It could just create yet another problem for them to solve.
HOW ARE YOU GENERATING AND PRIORITISING IDEAS TO KEEP AHEAD OF THE COMPETITION?
We’re asking our customers what’s most beneficial to them. Changes we make must help everyone, not just a few, and be so profound we couldn’t not do them. We’ve heard investment is what our customers want next, so we’ll be going there.
FINALLY, IF YOU HAD TO DO IT ALL AGAIN, WHAT WOULD YOU DO DIFFERENTLY?
From what I know now, I’d focus on the community. As a start-up, once you have the general idea of what you want to solve, find the community and learn — from them — everything that would solve their problem. Then you end up with a focused solution you have a market for and it becomes easier to open it up to a wider audience.
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