Digit is an American fintech company founded by Ethan Bloch in 2013. As he lost his job in finance, he launched a social media platform which he sold, and later, he created the app Digit. In terms of revenue generation, Digit makes money in a similar way to many other fintech companies. The majority of Digit revenue comes from its subscription service. The remaining revenues come from withdrawal and referral fees, and cash interest.
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Origin Story
Digit is an American fintech company founded by Ethan Bloch in 2013.
After losing his job in finance because of the GFC, Bloch launched the social media marketing platform Flowtown in 2009. The platform attracted moderate investor interest and was eventually acquired by Demandforce three years later.
Bloch then felt compelled to build another business from the ground up. This time, he decided to honor his background in finance by spending eight months developing the app Digit. When released in 2014, Digit was based on a text bot service where customers could communicate with it via SMS.
In 2015, Digit became a standalone app and subsequently expanded its product offering to include saving and investing plans, debt servicing, and overdraft protection.
The app has now helped consumers save over $5 billion since it was launched.
Digit revenue generation
In terms of revenue generation, Digit makes money in a similar way to many other fintech companies.
Following is a look at each revenue stream in more detail.
Subscriptions
The majority of Digit revenue comes from its subscription service.
For $5/month, users get access to automated savings, overdraft protection and reimbursement, and debt and bill payments. They will also earn a bonus of 0.10% in savings interest.
Bloch notes that the Digit subscription service helps its users save an average of $2,200 per year. This is a great deal for the customer, who only has to pay $60 annually. But it is also beneficial to Digit who makes more money on cash interest. More on that soon!
Withdrawal fees
Digit allows its customers to withdraw funds at any time free of charge. However, the transferal of funds from a Digit account to a bank account is not instantaneous.
For those who desire a quicker transaction, Digit charges a flat fee of $0.99.
Cash interest
As noted earlier, Digit earns interest on the cash residing in member checking accounts by lending it out to other financial institutions.
This is known as Net Interest Margin. On average, it amounts to 3.35% across all U.S. banks.
Referral fees
Late in 2020, Digit launched its investment service matching consumers with a diversified portfolio of exchange-traded funds (ETFs).
According to their desired level of risk, customers can select between the Conservative, Moderate, or Aggressive options. Each ETF is managed by investment management company BlackRock.
Digit also offers their individual retirement account (IRA) service through Vanguard, giving users a head start on a retirement savings plan.
For both services, it can be safely assumed that Digit receives some sort of referral fee in exchange for providing investment capital.
Key takeaways:
- Digit is an American fintech company founded by Ethan Bloch in 2013. With a background in finance and a passion for entrepreneurship, Bloch eventually created an app to help people managing their savings and investment goals.
- Digit charges a monthly subscription fee to use its service. It also charges fees for instantaneous transactions and earns money by lending out member funds to other institutions.
- Digit also earns a referral fee via its investment and IRA services for providing investment capital.
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