The Recursive: What is the biggest problem Flow is solving for its customers and what is the story behind the startup?
Daan van Klinken: We saw that the biggest cause of stress in the world is financial stress. Related to not being able to live, reach your life goals, like buying your first house and starting a family. That’s what keeps people awake at night, so we decided to solve this problem through money automation.
We recognized the effects of keeping all of your money in one big pile and your bank account everywhere. It’s really hard for people to reduce spending and start saving because they get overwhelmed with the amount of digital bank accounts they have to control at once.
We also saw that our grandparents in the Netherlands were already doing it better than us, putting money aside in a money box in each compartment separately, for clothing, fuel and so on. You take money from the jar and if it’s empty, you know, you’re going a little bit too fast there. So, we thought why not bring this back to the 21st century but digitally, giving people the same feeling of control over their finances.
We came up with the idea when we were freelancing ourselves. At the time, we were thinking of building a completely different fintech startup, actually. But we saw this problem being all around us and decided that we need this bank with multiple jars. Doing it by hand every time was annoying, so we decided to automate this process and that’s how we came up with the idea and built it first for ourselves and then for others.
Usually, when freelancers start, they tend to think of money short-term, that all the money is for them. Later they realize they have to pay taxes, think of the insurance, pension, etc. At the end of the day, you have to pay a big amount and it’s really annoying. So our solution is that every time any money comes in, we’ll make sure tax money and expenses are set aside. We help you build up a buffer as the first step towards financial control, and after that we help to look into the future and teach how to make sure that you are well off.
What are the benefits that Flow is offering to its customers?
One is that you do not rely on your own willpower, instead you do it on autopilot. This way it is less likely for you to stop and go back to old habits.
Second, you get to choose a method that suits your lifestyle so you can manage your money in a way that suits you. On the app, you can see a video course from the author of a bestseller on money management, or an influencer you like, and you can implement their ideas into your financial routine.
Third, it gives you a feeling of control and relaxation. You know it works, that you are building up, reaching those financial goals and you don’t have to do anything for it.
At what stage of development is Flow in 2022 and what are your short and long term plans?
The app is done, it’s live and regulated. You can connect to all the Dutch banks and some of the banks that are available in other countries in Europe. For now, we’re focusing on the Netherlands, but once we have a license for ESD countries, hopefully next year, it will be available all over Europe. We do have some German customers already and some other countries, and we are currently talking with Bavarian parties.
Long-term, maybe in a year, maybe in a couple of years, we want to reach the self-driving version of money management, and AI integrated, where you could tell the app about the thing you plan, like taking a student loan this year, mortgage in a couple of year or going to Bali next week, and we make sure all the bills are predicted and paid. That’s the big vision that is already in motion. We see a very big audience in the upcoming years to join us.
What is your competitive advantage and who are your main competitors?
I actually used to work at ING, at a PFM, personal finance management app. There are a lot of FinTech apps that also want to help you with your money, which is great. But the traditional FinTech apps that connect your banks but only give you insight on, let’s say, categories you are spending your money on, they give a first understanding of how you manage your money but no other recommendation on how to improve it. We’ve noticed that after time people stop using those apps because it becomes annoying to see your own bad behavior.
We do it completely differently, by looking into the future and asking where a person would like to go and achieve. That’s a very big difference between a lot of PFM fintechs. We could also consider neobanks that do a little bit of automation as competitors but they could also be our B2B audience. We are looking into integrating into neobanks at the moment and are moving in that direction actually. So it’s interesting that what today can be seen as a competitor, can also be seen as a customer tomorrow.
We see our competitive advantage to be that we, on the one hand, are very knowledgeable about banking, bank connection technology, which is really hard on its own. On top of it we are building a great UX, having a lot of product people in our team, me included. We’re not only giving you a technical app, which you can program your bank with, we have people from the health industry, health influencers and influencers that know how to build up habits and money behavior. We are making it more human, which is really hard for other companies to do. That I think, is very powerful that we have the whole spectrum of banks connections and new hardcore stuff, UX products, and then the behavioral part and content. That’s our power.
How does your business model work and how do you go about monetizing your service?
We started and still have in the Netherlands a B2C business model. It’s an app, a free app, but you can also choose to use a subscription for it, i.e a freemium business model.
But the one we’re moving into right now is a B2B, or B2B2C SaaS business model. We are integrating our technology and banks, financial parties, that pay for those integrations and that’s how we make money.
Our overall strategy for B2C is to make it available for free for as many people as possible for what they would use it in general. And then the power, advanced features, like the videos and recommendation come with the subscription.
Based on your experience and observations, what are the emerging trends in the freelance sector?
We do have to say that 72% of the freelancers that use Flow also use it for personal money, because with one half of your finance dedicated to your business and another half to personal money, it makes it even harder to manage compared to other people.
As one of the trends, we see that people use different financial products next to each other more and more. Multiple banks at the same time, investment accounts, because they all have different benefits in different places. This creates new problems for people because you have money in different places. If you’re a freelancer, you have your business accounts, personal account and other bank account for budgeting, investing, and crypto. That we solve.
Second, people want to avoid financial surprises, as well as build wealth, for example, to retire early.
At the beginning of COVID, people thought it was going to be a financial crisis. Though it was not much of a financial crisis, people were googling about budgeting, and we saw our ads triggering a lot on the topic of saving and how to get the most out of your money.
And the third one is on reaching financial life goals. Compared to our parents, we see that it has become harder for freelancers and other people to afford buying their first home or start a family. There is generally an effect called ‘Lifestyle inflation’ when every time you get a higher salary, you increase your spending and, thus, your lifestyle. This is a rat race that is very hard to break out from. But the high inflation we are experiencing now is forcing people to live on a lower standard, thinking of paying energy bills first. We want to use this period for the benefit of those people, to show them that they do not need the higher standard to be happy. Instead they could have some extra cash, and build up their wealth to help their future self. This will have a good effect on the future.
Can you share some examples of how the Visa Innovation Program helped you develop Flow?
The program helped us get in touch with parties that fast tracked our learnings on validating our B2B direction. Through meetings, we got to learn about the problems in Eastern European markets in Greece, Bulgaria and Romania, which gave us more insights on how we can develop products there, aligning to our goal of European expansion.
During the program we’ve seen a lot of enthusiasm around this direction from people in the industry, which pushed us to fast track. Being able to present our solution and attend the sessions was also of huge value, of course.