In this episode, you’re going to be learning about a new trend, which is to save now and buy later. It’s a great episode you do not want to miss.

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Welcome to the 2X eCommerce podcast show. This podcast is dedicated to rapid growth in online retail. Every week, I bring in an expert, a founder, or anyone who will give you value that you can apply to your eCommerce operations and help you with incremental growth. That is the ethos of this podcast. In this episode, we have Michael Hershfield. He is the Founder of Accrue Savings.

What Accrue does is interesting. Do you know the buy now and pay later players like Klarna and Affirm where you buy the products in debt and then you pay? He’s flipped that concept in the head with Accrue in the sense that you save now and you buy later. It’s like a savings account for retail, for merchants.

When I see that nice mattress I want to purchase, rather than suffering from instant gratification, when I see Accrue Savings on my favorite mattress site, I think about delayed gratification by saying, “I can save for this. If I save £50 or $50 a month over the next twelve months, I should be able to save.” The interesting thing in the model is the fact that merchants then give purchasers an incentive to want to save. It’s a reward in terms of a discount. When they get that discount, they’re onboarded to the savings, they start to save, and then they’re able to purchase that item.

It’s interesting. They’re a new solution. I like bringing new solutions that you haven’t necessarily learned about on the show, which gives us ideas to test. There’s no point in bringing an app that you use on a regular basis. It’s not great. Remember the Extend episode in which I interviewed Rohan Shah. I found the extended warranties proposition interesting. That’s what attracted me to Accrue. Super interesting conversation I had with Michael. Enjoy this episode. I shall catch you on the other side. Cheers.

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Michael, thank you for making it to the 2X eCommerce podcast show.

Thanks for having me. I’m excited to be here.

You’re the Founder and CEO of Accrue Savings. You’re rethinking the way certain consumers shop. Do you want to talk about Accrue Savings? Give us a 30-second elevator pitch for Accrue Savings, please.

Accrue is a simple idea. The idea is that every American and ultimately in the globe will have the opportunity to save up with a brand for an individual product by opening up a bank account to save with them. We’ll talk a little bit about my personal experience and why. This is a forgotten part, I think a lot about how much credit has been introduced to American consumer behavior and global consumer behavior.

We have forgotten that most people save up for purchases. Merchants deserve the opportunity to offer a savings account to consumers and should reward them. Like their rewards for purchases, we believe deeply that the mission of savings should be introduced to the consumer where they are and that’s searching for things, and offered the incentive to do it.

We’re going to jump into the user experience because this idea is novel to me. I am excited about the proposition. Before we do that, I’d like to get your background or your backstory. From the sounds of things, you’re not American. You’re Canadian.

Is it my accent? We talked before.

I’ve done my research. My research is backed by training. I’ve interviewed a lot of Canadians and Americans. I’m starting to figure out accents. Do you want to give us a bit of your background or your backstory?

I grew up in Vancouver, Canada. I started my first tech company in 2007 in Toronto. I thought it was the king of the world starting a company. I raised a little bit of money. It’s funny, it’s not the competition. I raised $250,000 and $500,000 when I raised my seed round. How small when you look at valuations today? I thought it was the most amazing thing and I got the bug.

2009 happened and the company did not work out. I moved to New York because I wanted to go to that place. At that time, Toronto was not blooming as a tech ecosystem as it is today. I moved to New York in pursuit of my dream of entrepreneurship and being around entrepreneurs. I had a lot of scars from that first experience. The mental health challenges of being an entrepreneur and the ups and seeing yourself in a way that maybe the world doesn’t see you when things don’t work out hurts.

I needed to pick myself up. I moved to New York for an amazing job in an early tech New York 2009 and 2010. I’ve been at a number of jobs in New York over the years. I was at WeWork and had a bunch of jobs including co-working sales business. I have had lots of different experiences. Accrue is my first entrepreneurial startup since that 2009 unwinding. My own personal journey seeing the United States and seeing New York through the eyes of an immigrant lends itself to the company that I started today.

It’s powerful. At WeWork, you were in the product, sales, and the like. With Accrue, why eCommerce, savings, and retail? Are you exclusively for a digital solution for commerce for eCommerce or do you transcend commerce? Are you going to be in retail stores and retail experiences?

The consumer experience is all about introducing a savings account embedded through the merchant to offer to the consumer. That consumer may buy in-store but may buy online. It’s omnichannel. Ultimately, it’s a use case. It’s about empowering the consumers to buy and save on their terms. We haven’t talked about the user experience but Accrue is offered both online and embedded in the consumer experience. We also already have merchants that are using us with their sales team. Some of our partners have high ticket prices and use sales teams on the phone.

The idea here is that no matter where there is an offering to a consumer to potentially buy something, there isn’t just one path, which is a credit option, “Can I offer you a credit alternative?” There should be a savings alternative for consumers to buy on their terms. You can take Accrue today and go in store for any of our partners and use the e-card to make the purchase. We produce a Visa debit card, ultimately, what a consumer saves out for to make the purchase. It’s omnichannel in the end-use case and current state. The best place for this to manifest is where consumers are.

We know that consumers surf the web. 80% to 90% of consumers never get to the checkout. Merchants are competing for their eyeballs and ultimately for their dollars. Let us provide a solution, which is Accrue, for brands to offer consumers the opportunity to save up for something well before they’re able to make the purchase. Ultimately, they’ll make the purchase to the consumer whether it’s physical or online.

Let’s step back to your backstory. When you started, your wife gave you an ultimatum. It was for a period of time and you had to sprint. Do you want to break down the first three months of starting Accrue Savings and then we’ll move into the experience?

When I talk to prospective entrepreneurs and founders, I talk a lot about working in a box to validate an idea, this sprint mentality, and not being addicted to your passion or vision. Sometimes you need to validate something before you dive in. For me, I had the time, two kids, and a mortgage. I left WeWork. My wife is an amazing partner. She and I talked a lot about what I was going to do next. Frankly, in January of 2021 when I left WeWork, I was very much looking for a job. I couldn’t escape this idea, this view of the world that the world was missing something important.

I spent a couple of weeks interviewing. I went to my wife in February of 2021 and I said, “This needs to exist in the world. Merchants need to offer savings accounts in the world.” She said to me, “We have 100 days.” Starting on March 1st of 2021, she and I agreed on two KPIs, two business metrics that I had to hit. One of those metrics was not fundraising. Can I prove that consumers will use this product? I did an extensive enterprise-grade consumer research study with a consumer research firm that validated this. I had to prove it to her. I had to get three merchants to commit to trial this product all in 100 days.

Did you have a product?

To decide that I was starting this company. I hadn’t even started the company yet. A hundred days go so quickly. When you’re relentless and you want something, it’s amazing how much you can do in those 100 days. I prodded my network for conversations with retailers and got the consumer research work done. A hundred days later, I had five retailers that committed to using the product and an extensive consumer research report, which serves as the baseline of the company.

What were the findings? Could you break down the consumer research report questions that it was trying to validate your hypothesis?

I had to prove to the most important person in my life that this was valid. Her number one question is, “Do Americans save? Will consumers use Accrue?” You can’t prove it to the nth degree. Statistics and this type of research report can prove it to a point. What I tried to get to narrow the definition of research was, are Americans saving? What are they saving for from a category level? Will they use, at least in an introduction set, something like Accrue?

What I got back was relevant. 60% of Americans are saving for high ticket price purchases, which is an important number. The question that the research firm did was, what are they saving for? I have this target list of categories that I know Americans are saving for. You can see this in my writing. We know Americans are saving for travel, cars, furniture, home, and jewelry.

There are a number of categories for health. There are categories that are important. There are large TAMs that massive companies are built on top of. When we are going to market and you can see this from our merchant adoption, we are responding to a specific need that we know that the consumers have articulated want. That’s what I had to prove to her.

When I got that report and the readout back and when I closed those retailers, it wasn’t a choice to start the company. The choice was done for me. For me, that is my model to start a company. When I decided to do this, I was not doing this just on my own vision but based on a vision and support of retailers to do this with me and it continues to be like that. This company launched in December of 2021. When I talk about the retailer support for this vision, it is powerful.

We know consumers want this right. We see the BNPL and the headwinds being there. How challenging retail credit cards, short term credit, and consumer credit are? This is something that is missing in an ecosystem. It’s not just the United States problem, although this is what we’re solving today. This is a consumer and merchant problem that is both emotional and mission-driven but also very much business value. That’s the power of Accrue.

When we started this conversation, my thoughts were that Accrue’s competition was the buy now and pay later, the BNPL. You have a mantra, which is to save now and buy later. Your competition seems to be banks because you’re offering a savings account at retail. Is that a fair assessment?

My competition is Facebook and Google. We haven’t talked about this in this conversation. We pre-talked about this. Accrue is offered as an upper-funnel and mid-funnel marketing tool for merchants to offer consumers when they’re in the consideration phase. Marketing consumer behavior is interesting online.

Most consumers browse the web. They take weeks, months, and potentially years to buy a product, to go on a trip, to go on that family vacation, to buy the outdoor furniture that they need for their property. This is where this is interesting, maybe to buy back to school clothes for their family. The reality is that it takes a long time to get a consumer through that funnel.

For us, when we talk to merchants, we say to them, “Stop spending with Google and Facebook to retarget. Especially with the removal of third-party cookies, you are spending with them trying to drive consumers down the funnel. Why not take that spend and deposit it into the bank account of consumers?”

Use that spend and inspire those consumers to get to that endpoint, which is ultimately the buyer. They buy it on their terms and not with financial insecurity that might come from a BNPL or a credit card. You mentioned banks. Yes, that is also the case too. When we think about it from the behaviors of a merchant, for my competitor, it’s potentially their traditional marketing spend. For consumers, it is their own wallets. It could be what’s sitting in the piggy bank on their desk or their individual bank accounts.

Disposable income. This makes perfect timing for going through the experience. On your site, you have AllBirds, Aurate, Smile Direct Club, and Casper. These are pretty big names. I presume you’re like an enterprise-first solution and then you could address the rest of the market. If I was to go to Casper, Smile, or Aurate, how do I interact with Accrue? I open up a bank account on the merchant site or an app. Could you break down the experience, please?

If a consumer finds us on a brand’s website or on a merchant’s website, they could find us on a category or homepage. You found us on Casper’s homepage. When the consumer is ready, when they’re in an abandoned shopping cart email or win-back email, the consumer is offered this while they’re browsing or in their email.

They will see offerings, “Not ready to buy today,” or, “Are you considering the purchase?” “Do you want to start saving up for Christmas, the holiday season, or the summer?” The customer will say, “Yeah. I can get 20% in yields or 20% free money towards my purchase that I ultimately want to do for a necklace. I’m not sure what necklace I want to buy but I do know that I want to save up for my anniversary which is 6 to 9 months from now for my significant other.”

The idea is that you would see that offered in them or on the merchant’s experience and it would drive you to set up an FDIC savings account. In the United States, they go through KYC. You open up the account and then ultimately you have this bank account that you set up a savings schedule for. Deposit it weekly, bi-weekly, or monthly on whatever terms the consumer feels are most comfortable for them.

We forget that most consumers do not purchase on the day they travel to your website. 90% of consumers aren’t ready to purchase. Whether they can’t afford it, they don’t want to buy it, or they’re not ready, this is just offering someone a timely and processed framework to start saving with Accrue and the individual merchant for that individual product. Ultimately, when they save up for it and hit the goal, let’s not forget that they’re rewarded. When they set up an account, they might get $20 in their bank account. They might get $50 free in their bank account when they hit 25% or 50%.

Kunle, I might be saving up for this amazing gift for someone but I want my friends or my parents to contribute to it. One of the key features of Accrue is social contributions. One of our wonderful early merchants was Eterneva, which is a jewelry brand that helps consumers save up to turn their ashes into diamonds. It’s a powerful and mission-driven business. That is something personal.

There, we see consumers asking their loved ones to contribute to an expensive product, “I’m saving up for this diamond that I want to buy off of my ashes that my mother helped me save up for.” This GoFundMe social contribution piece is not just the rewards and the milestones they achieve through saving but also bringing people around you to help save up for the furniture, the jewelry, or the trip. Those are all powerful emotional social values that when we think of businesses, it’s particularly valuable.

You made some points.

I want to say something important. Financial insecurity is such a deeply painful thing that people go through. It’s much easier to ask someone to pay for something they want to buy they’re saving up for than to ask someone to help them pay down their credit card or pay down their BNPL loan. When we think about mission-driven businesses and what brands stand for, it’s important to think about economic sustainability. Talking about this around not just consumer behavior but also, what society we want to live in? What do we want our brands to stand for?

My question is, what happens when I have saved up for that Casper bed or Smile Direct Club?

You have your SDC debit card. You have your Casper debit card. Like you would go and buy it regularly in-store or online, you take your debit card and you make the purchase. When you’ve achieved that dollar amount, let’s say it’s $1,000, $2,000, or $200, when you have saved up and earned the rewards and gotten the contribution to make that purchase, you go and make that purchase.

As a consumer, Accrue Savings does not know the product. It knows the amount. It’s not going to be purchased on my behalf after I’ve saved up for the bed. I could use that debit card and shop somewhere else.

The debit card is tied to an individual merchant. Don’t forget, you are rewarded with deposits of these cash rewards. You have to take your Smile Direct reward, deposit it, and spend it at Smile Direct Club. You can’t use your Smile Direct card and spend it with a competitor. This goes back to the consumer. You can pause your saving schedule. You can also withdraw your principal. If you need the money to pay for rent, pay for something different, or if something changes and your behavior changes, you can always withdraw your money. It is not deposited with a particular retailer. It is your savings account. Only when you’re ready to purchase, do you purchase.

I get these rewards. Do I get interest in my savings with Accrue or was it the reward?

The cash rewards are like an interest. It could mean that you’re getting a 25% or 30% yield on your money. If a merchant is contributing $200 for $1,000 AOV and you save that over six months, that yield is significant.

For savings, you get a rebate first and that’s your target savings amount. Over the period of making those payments, you’d get a few dollars here and there to encourage you to hit your targets on time. You then have this debit card, which you could use to purchase from that merchant.

We don’t use the language of rebate. It needs to be seen like how everyone behaves, which is the savings account, this notion of interest, this notion of rewards. You get something for the dopamine that the reward that comes from those things. You are celebrated with this capital, with this cash reward that ultimately needs to be spent at an individual merchant that you’re spending with.

It makes sense. Does that mean that the merchant pays Accrue Savings for converting that customer who would not otherwise have converted? Most of your call-to-actions are at the top of the funnel, I would think. The lowest down the funnel is PDP, the product description page. You’re typically on the homepage or product page and you’re saying, “You can save for this product here. Why not start saving?” It then opens up an account.

We make money at the purchase point. We don’t charge our merchants a SaaS fee, an installation fee, or a monthly fee to use the product. It’s about aligning to the merchant’s best interest, which is performance. This goes back to why we talked about competitive dynamics. Google and Facebook charge you throughout the funnel for targeting consumers. We should get rewarded with performance.

This is what every eCommerce director is probably thinking about who’s reading. My final question has got to do with conversions. I had someone come in to talk about warranties. He runs an online and digital-native warranty company that gives you the same perks you have with AppleCare for any D2C operator. The one thing I asked him was, what’s the net impact on conversions? Do you have any statistics or numbers for merchants that you’re working with that show that this percentage of people move from a PDP to checkout? With Accrue, are you able to salvage this portion of people?

We’re going to come up with our first case study with Smile Direct Club, which we’re excited about. You’re the first to know that. We’re coming out with a brand, which is a large brand. We’re outperforming by about 70% of other elements on their website. It’s early. We just rolled out with them around purchase conversion.

We do know through expansion of use cases with them how well we’re performing. The return on ad spend is significant enough that they’re doubling down on use cases for us. I’m happy to share the case study with you on the 70%-plus conversion improvement from other assets on their page, conversion optimization. We are outperforming other elements on the site.

Also, we have a positive impact on PDPs. When we think about, “Does this impact the performance on PDPs?” It does not negatively impact the performance. It has a positive impact. We are attracting consumers that weren’t purchasing anyway. It’s all upside. It’s all gravy for our merchants when they think about us.

In addition, with many of your readers, I’m not sure where they sit on the size of operations standpoint whether they’re shop merchants or enterprises. Also, repeat customers. We’ll be introducing this for funding accounts of repeat customers. This is going after a set of consumers that are also hard when an LTV standpoint is important. How do you fund the bank accounts of consumers that might buy that second pair of glasses with you or those second pair of shoes with you? We have the value proposition as well.

Another question came to mind, which has got to do with when I open a savings account with you and it generates a debit card once I’ve saved. If I was going to another merchant, let’s say I started with Smile, I set an account open going to Casper, how does account management work? Do I get multiple debit cards?

Yeah. The debit number is tied to the individual merchant. We’re not producing physical cards yet because none of our merchants have asked us to produce physical cards yet. It’s electronic Apple cards that are reflective of the particular merchant that you’re saving for and are produced at the point that a consumer is ready to purchase or has saved up.

From your mouth to God’s ears, Kunle, many consumers should be standing up for many products. This business has consumers that are saving for multiple things. Over time, I’m sure it will be more expansive. Yes, that has an important value to our merchants. We are Switzerland to them. We do not choose sides. All we are doing is offering this banking and marketing tool for them to acquire customers at a lower CAC than they’re already doing.

Michael, I could go on and on. It‘s super interesting finding out more about Accrue Savings. I’d like to touch base again months from now to see how you guys are doing. It seems interesting. Particularly given the fact that you have access to so much customer data, especially customers that save, there are a lot of opportunities to cross-sell. Many thanks for coming on the 2X eCommerce podcast show. For those people who want to find out more, it’s AccrueSavings.com. How can people ask you questions?

Send me an email. This is a mission. There’s this vision of ubiquity that every retailer in the world should offer savings accounts. I deeply believe that’s forgotten. If you share that vision or you want to push back on that vision or you want to kibitz, I’m always game for a good kibitz, which is Yiddish for good conversation. This was a fun one, Kunle. I’m excited we got a chance to do this. I look forward to being in touch in the future.

Same here. Incredible stuff. Thank you, Michael. Cheers.