It’s a well-known fact that people act irrationally when it comes to money. Relatedly, it’s exceptionally tough to change consumers’ behavior around their finances. One of the most common areas we see this pattern is the difficulty consumers have in saving money: a recent survey found that 51 percent of US adults say it’s their biggest cause of financial stress. Unfortunately, these compounding irrational decisions often lead to financial insecurity. But what if, instead, our illogical behavior could be leveraged to drive financial stability?

Entrepreneurs have been fascinated by this problem since the origin of fintech. Mint was one of the first online tools to offer personal financial management, assisting consumers with budgeting, savings, and overall cash flow needs. (Mint was also one of the first fintech companies that was tailored to consumers, rather than selling tech to financial institutions.) Unfortunately, the Mint approach has been unconvincing. Despite many noble attempts, no company has been able to create a personal financial management product with more than a few million active users. Too often, these budgeting apps are akin to calorie counting—it’s usually easier to just uninstall the app than to change our financial choices. 

The good news is that there are a number of strategies to help consumers save money that are seeing success at scale. Among the most interesting approaches are financial automation and exploiting the concept of “gambler’s fallacy” for the saver’s benefit. Both seek to offer solutions that address—and, in some cases, embrace—our irrational behavior when it comes to microeconomics. 

The personal finance app Digit automatically and invisibly saves money for users. By analyzing your spending habits, the tool dynamically calculates the amount the user can afford to part with without materially impacting his or her weekly cash flow needs. That “unmissed” money is transferred into a Digit savings account. 

This method has had significant success—Digit claims its average user saves $2,500 a year—and prompted a number of copycat apps. Stash, Acorns, and Tally have similarly automated the process of saving, investing, and paying down debt. This tactic works because it removes consumer choice from the equation entirely. If consumers aren’t making decisions, then they can’t make bad ones. 

The logical extension of this is the concept of “self driving money,” in which consumers are not only automatically refinanced into the credit cards, loans, and mortgages with the most favorable terms, they are also offered products with characteristics match their own irrational behavior. So, for instance, a high-limit credit card might be offered to the consumer who considers it a source of security, but not the consumer who views it as an irresistible temptation to spend. Automated finance is less about the ability to decrease paperwork and prices, and more about the ability to impact our choices and cognitive biases at scale.

Gambler’s fallacy is the mistaken belief that what has occurred sparingly in the past is bound to occur more frequently in the future; it’s the illusion that underpins the lottery. Though this belief has traditionally been a financial drain—the average American spends about $220 per year on lottery tickets—fintech has figured out how exploit that misconception to benefit the consumer. 

Through a mechanism called a prize-linked savings, consumers are offered a chance at a jackpot each time they put away money in their own account. This “no-lose lottery,” incentivizes people to save in the short term. The outcomes have been promising. When Walmart implemented a prize-linked savings program attached to its MoneyCard (a reloadable prepaid card) in 2016, users saved more than $2 billion in just over two years, a 38 percent increase, on average. In this case, the product is designed to leverage our own cognitive bias, which is hugely different from the traditional tack of attempting to educate or shame people into budgeting. Instead of struggling to change our behavior, why not turn our weaknesses into strengths?

Chris Dixon has written thoughtfully about the contrast between weak and strong technologies—the fix that’s familiar and easily accessible vs. the version that strives for the ideal solution for the problem at hand. Whereas Mint’s personal finance tool arguably took the weak approach, automated savings and prize-linked savings are two excellent examples of strong techniques to alter consumers’ financial choices. As fintech advances, it will introduce not only novel technologies to improve our decisions when it comes to money, but also clever product design that aims to harness our biases, rather than fight them.

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