For most of Sean Collins’s 35 years in the financial services industry, his work has “made large corporations richer,” he says.
He’s proud of that work. But he’s excited that now, as co-founder and CEO of Boston startup Cinch Financial, he’s building technology that aims to help regular people manage their money and gain stronger financial footing. As Collins jokes in his Twitter profile, he is a “financial services lifer now redeeming myself through” Cinch.
“I would not want on my epitaph: ‘Made large companies rich.’” Collins says. “I can’t exit that way.”
Cinch is essentially developing a digital chief financial officer for consumers. The company’s software continuously assesses the user’s finances and recommends actions, based on his or her situation and reams of data. The idea is to use “machine learning and other A.I. techniques to map out all possible options that optimize overall financial condition and savings” for each user, Collins says.
Cinch says it can help with basic tasks, like finding a cheaper auto insurance policy, as well as more significant and sometimes daunting financial obstacles, such as how to do wiser budgeting and pay off debts. The company plans to keep adding capabilities to its software, including offering retirement planning advice and comparing health insurance plans, Collins says.
Cinch sits at the intersection of fintech and artificial intelligence, two sectors getting heaps of hype and investor dollars these days. The 35-person startup is backed by nearly $10 million from a single investor that Collins declined to name on the record.
The company certainly isn’t the only one offering mobile tools for personal financial advice and education; some related firms include NerdWallet, Mint (owned by Intuit), and LearnLux. Cinch says it aims to distinguish itself, in part, by providing a more comprehensive and personalized service than competitors.
Collins likens Cinch’s product to Waze, the mobile app that provides turn-by-turn driving directions and suggests alternate routes based on accidents and traffic jams. In its current form, Cinch provides step-by-step recommendations for navigating personal finances; users can take or leave the advice, just like when driving with Waze.
But eventually, Cinch aims to become the equivalent of an autonomous vehicle for your finances. It intends to actually handle transactions for the user. For example, the software might automatically move money into a savings account, prioritize and carry out debt payments, or switch to a cheaper auto insurance policy on a user’s behalf. (More on this below.)
Cinch might have an opportunity to build a significant business, if its technology works as advertised and enough consumers are willing to pay for it. The company says its first product will launch to the public this summer.
But the startup’s plans also raise interesting and potentially concerning questions about how much decision-making power people are willing to cede to machines, and how much trust they should put in the companies that control financial software and data.
Cinch is primarily targeting millennials who have debt and not a lot of assets, Collins says. Many of these young adults prefer using apps and other technology for managing money, and are less likely to seek out a human advisor and “sit down face to face,” says Kerri Moriarty, Cinch’s head of company development and a member of its founding team.
When people sign up for Cinch, they share basic information with the company that paints a picture of their financial situation—their income, whether they rent or own a home, whether they own a car, whether they have children, and so on. Then, they provide Cinch with limited access to at least one of their checking or savings accounts. (Cinch doesn’t receive login information, so it currently can’t move money around; but it does see account balances and lists of transactions.) Cinch also receives access to users’ credit score.
At the same time, the startup has amassed a large inventory of data on products from various banks, insurers, and other vendors. It tracks the pricing and features of competing credit card programs, insurance policies, cell phone plans, and other things users may be interested in.
A key piece of Cinch’s pitch is that its software provides unbiased advice and only acts in the best interests of the user. The company says it’s able to accomplish this because it doesn’t take payments from other firms to promote their products. Its website and app don’t have advertisements, and Cinch doesn’t get paid for generating sales leads for other businesses. Cinch plans to make money mainly through charging each user a monthly fee, probably around $5 or $10, Collins says. The company also intends to sell its product to businesses and organizations that would offer it for free to their employees, he adds.
“There’s all this noise” on consumer finance websites and apps, Collins says. “A lot of the tech out there has basically replaced junk mail. It’s just junk mail in electronic form.”
Cinch isn’t solely focused on recommending financial products, Moriarty says. It’s also about teaching better spending habits and advising when not to sign up for something—like if the person is thinking about opening a new credit card but has a load of debt.
People don’t always make rational financial decisions, of course; their choices can be influenced by emotion and other factors. The study of the psychology behind humans’ financial decisions is called behavioral economics, and it’s something that Cinch’s leaders say they’re thinking about deeply. The company tapped the expertise of several behavioral economists to help Cinch “think through how to make our guidance efficacious,” Collins says.
Cinch aims to provide advice that helps users accomplish their goals, even if the pathway isn’t the most logical. Moriarty gives the example of paying off debt on multiple credit cards using either an “avalanche” or “snowball” approach.
The avalanche method means paying off the debt with the highest interest rate first, and then working your way down. The snowball method is the reverse. The avalanche approach enables people to erase the debt faster, while paying less in interest. But some people lose the motivation to stick with this plan, Moriarty says. They might find it easier to stay the course with the snowball approach because they feel like they’re building momentum as they close out the smaller debts.
“Which one is going to get a person to actually stick with it?” Moriarty says. Cinch’s system “will evolve to a point of knowing, OK, we’ve met someone like Jeff before, these tend to be his preferences.”
Collins believes many consumers want something that simplifies and unifies their finances, and gives clear steps for improvement. Early users have said to Cinch, “Really tell me what to do and when to do it,” Collins says. “It’s clear they just want someone to take this over for them—but with them in control, to be clear, and defining it.”
If things go as planned, Cinch would start adding autonomous capabilities to its software over the next year or two. But how willing will users be to let Cinch take the wheel on their finances?