Cleo: The Gen Z Fintech
How it all began
Founding Story:
Cleo was the brainchild of founder Barnaby Hussey Yeo, who started in 2016, a data scientist who was reportedly terrible with money. He previously used to work at Wonga, which was under a lot of criticism for its predatory lending practices, and noticed a vast majority of customers were spending more than they earned, had overdrafts, and had no resources to help them navigate this.
Yeo was earning a decent wage as a data scientist but kept on going into overdraft each month and thought this was incredulous. Thus, he built little scripts logged into his online banking that sent him texts prompting behavioral change on payday, which eventually sparked an idea:
He went to an incubator called Entrepreneur First, where he built the first version in four weeks, iterating as he went along and building for himself, eventually teaming up with Alexsandra Woziak to build out Cleo.
The insights derived from sharing with friends in the incubator led to a digital AI with a human element, which is what I believe is a Cleo product differentiator from all the other fintech companies. This product differentiation is clearly shown, as Yeo mentioned in his interview with the Center for Data Innovation: “When people talk to Cleo as a digital assistant, they ask for advice like they would a friend. They say please and thank you to Cleo. They want to feel okay about their money, and they ask things like, “Is it okay that I spent that much over the weekend, Cleo?” It shows a level of user engagement rarely found in other money management applications. (Wallace, 2017)
Armed with this innovative idea and unyielding determination, they both raised $700,000 in funding from a series of legendary angel investors, like Skype founder Niklas Zennstrom, Zoopla co-founder Wonga co-founder Errol Damelin, Albion co-founder to name a few. (O’Hear, 2020)
Product Story
Cleo main product is its AI financial assistant that tracks the user spending, helps users’ budget better, build credit, and escape their overdraft. The signup is very seamless that only takes two minutes to complete.
It has two modes of ‘AI personality’ — which is ‘Roast Me’ or ‘Hypes me Up’ — which the AI looks at the user banking data to offer money management advice and useful budgeting. The AI as a chatbot either roasts or hypes you up based on your spending and goals, has overdraft protection and various other budgeting alerts.
Cleo has two different offerings on top of its money-budgeting app:
- Cash Advancement: It allows the user access to $250 in cash advance with an express fee of $3.99 if needed instantaneously or within 3–4 working days at no cost. The user must set a repayment date. The lowest it can’spot’ is $20.
- Built-in money-management tools can help the user set up a budget and save through options like setting money aside, having a ‘swear jar’ — where they get fined for spending the user wants to avoid, rounding up, and setting and forgetting.
Cleo has two tiers of a premium subscription service: Cleo Builder and Cleo Plus.
A Cleo Credit Builder subscription, for $14.99 a month ($9.99 a month, a savings of about 33% if you are a student), is a way for beginners to build credit without debt. It comes with no interest or credit checks. It offers two days of early access to paychecks and has a higher limit of a cash advance up to $500 if a direct deposit is set up. If not, the user gets $270. It does not require proof of employment.
It also comes with the option to view your credit score daily.
The direct deposit and card security deposits are protected by $250,000 FDIC insurance, and Cleo uses Plaid to securely connect bank accounts to the app. This feature has cashback included, which is explained below.
Cleo Plus
Cleo Plus is another paid tier where the user gets access to cash advances, credit coaching, and cashback. Cleo gives instant cashback on spending, which the user picks as’money makers’ (five at any given time) based on where the user shops the most often.
They also have partnerships with Button to bring cashback to selected stores and retailers.
The cashback screen also has links to the online stores, so if the user makes a purchase at the online store, they could potentially get up to 7% cash back on their spending.
Cleo also has an incentive where there are little challenges and the user gets a tiny cashback, facilitating strong user engagement.
Most recently, Cleo unveiled a new tool called ‘Haggle It’ — allowing users to find the best deal in minutes using an OpenAI prompt to create a letter that can be used to negotiate rent, bills and so on.
Resources
Wallace, N. (2017, November 4). 5 Q’s for Barney Hussey-Yeo, co-founder of Cleo. Center for Data Innovation. https://datainnovation.org/2017/11/5-qs-for-barney-hussey-yeo-co-founder-of-cleo/
O’Hear, S. (2020, December 10). Cleo, the AI-powered “financial assistant”, raises $44M series B led by EQT Ventures. TechCrunch. https://techcrunch.com/2020/12/10/cleo-series-b/
