Piggybank Nigeria is a fintech startup which works to help people save money. The business mission looks mundane until you understand the power of saving. Largely, Nigeria is a place where a young man will work from January to November, make money, visit village, and then waste all in December. By January, the guy is broke and he is ready to begin another episode of stupidity. A company like Piggybank can assist such people to plan their lives better.
Piggybank.ng is a platform that works directly with financial institutions to enable you to save little amounts of money periodically (Daily, Weekly or Monthly) without really thinking about it and restricts withdrawals until set dates.
Piggybank.ng securely makes saving possible by combining discipline plus flexibility to make you grow your savings to reach your savings target.
The funds in your Piggybank.ng account is warehoused and monitored by UBA Nigeria Plc.. Piggybank.ng simply provides the saving technology.
Nigerians, besides the fact that we do not have a lot, do not save. So Piggybank offers a product to fix that friction which exists in the market: making it easier for people to save.
To fix that friction, Piggybank has to create a business model which is slightly different from the typical bank savings account. What they did is the core of their business and also the very reason most of their customers will find their products valuable. First, read this, copied from their About page.
We automate the process of saving tiny amounts daily, weekly or monthly; and then allowing you to withdraw for FREE on ONLY set withdrawal dates thereby practically making saving more possible for you by eliminating the temptation to withdraw.
The above information is the core of Piggybank business model: they allow you to save, you decide your withdrawal dates, and they impose a fine if you deviate from those days. From this simple Terms of Service, I can derive three things:
Accumulation of Value: By asking for the (expected) fixed withdrawal dates, Piggybank could plan on what to do with the saved money. If they want to invest the saved money in a fixed deposit, knowing the expected dates for withdrawal, as noted by the saver, would be helpful. If the saver comes outside those dates, for withdrawal, they charge a fee. That means that no matter what the conditions are, Piggybank will make money out of the saved money. It is either you allow them to keep that money in the fixed deposit (which yields interest), or you pay a penalty for breaking the agreement. In either case, the saved money has generated value for the fintech.
Saving Psychology: There is big psychology here. Very few people will like to withdraw outside the fixed-date windows as doing so will attract penalties. So, technically, if someone can have the courage to set optimal dates, there is a strong likelihood that the individual will indeed save money. Where the Terms of Service makes users to abandon the temptation to withdraw outside the fixed dates, the company has invariably delivered a product that has actually worked, since the customer has saved. Indeed, the firm has structured the minds of the users to avoid the temptation of withdrawing before time, and as the users honor that, the company has assisted them to save. The penalty for withdrawing outside the window is a 5% fee which is decent enough to change behavior: “Withdrawing outside those days attract a 5% breaking fee on just the amount you are withdrawing”
Customers Pay for a Proprietary Product: Piggybank invented a smart way which helps it to get away with not paying interests to its users. Largely, saving accounts are supposed to pay interests. (But Piggybank does not advertise that, except for the SafeLock which requires a long-term lock.) It can afford no interest paying for some of the saved money because it successfully made itself a mission-anchored enterprise that is out there to help the society. And by also making it clear that you can schedule deposits and withdraw free within the stipulated windows, it flipped the curve, pushing you not to be asking for fees, by cleverly reminding you that you can get its services for free. The whole constructs of asking you to set dates to take your money should not even arise. But here, the firm has made it brilliantly clear that to be a customer, you must be ready to meet your saving goal, otherwise it will fine you. No matter how you see it, customers are paying for a proprietary psychology that makes it possible for them to save, to avoid being penalized. There is no way you can be in the portal and miss your target without a penalty.
Notice that all the deposits are insured by NDIC, according to the company. And United Bank for Africa (UBA) warehouses the customer deposits even though customers do not need to have accounts with UBA. This fintech has used such a structure to deepen confidence in its business: everyone needs the help of Africa’s Global Bank. Certainly, UBA brings more reputational confidence to Piggybank.
Yes, all the funds in your account are held by UBA Nigeria Plc., who are insured by the NDIC – Nigeria Deposit Insurance Corporation, is an independent agency of the Federal Governmment
The Interest Yielding Saving
Oh yes, Piggybank does have an interest yielding product. It can pay you about 10.95% per year, if you are open to invest and lock that money for 1,000 days (more than 2 years and 6 months). That rate does favour the firm, but if you can sign-up for it, the implication is that you will have the money with fairly decent interest at the end of 1,000 days.
Earn Instant Interests Upfront with our SafeLock option – 10.95% per year
Avoid temptations. Lock all or parts of your savings in your Piggybank.ng account & receive instant upfront interest of up to 30% if you lock for 1000 days, which is about 10.95% per annum. It’s simple and 100% safe. Funds are sent back to your Piggybank.ng account on the return date you set.
However, the interest rate offered on its interest-paying SafeLock is not high. Anyone could have gotten a better deal from a bank depending on the amount. I do expect Piggybank to have a minimum amount to make this a business (it has some numbers in its FAQ). A motivated saver can combine the SafeLock and the non-interest service to execute a three year saving plan. Simply, the person can be saving, and over time be moving the money to SafeLock to accrue interests.
Piggybank is not your typical savings account. There is a clear innovation in what the team is doing. In a place like U.S, one can patent the business model because they are using the constructs of fees and dates to shape customer behaviors to save. It is an uncommon business model if you look at what the industry does. It pays you no interest, for saving, but could penalize you for using its platform, and failing to meet your saving goals! That specific condition removes any temptation you may have to withdraw money prematurely, making it possible for you to meet your saving goals. When that happens, the platform has offered you value, and solved a friction in the market (poor saving habits). The psychology of using fees and fixed dates to help savers reach goals is the fascinating ingenious algorithm the young people have engineered in Piggybank Nigeria.
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