Helping Millenials Achieve their Financial Goals - Henrik Rosvall & Johan Hemminger of Dreams

Learn more about Dreams:

https://www.getdreams.com/en/

Transcript

Maiko Schaffrath: 0:04

You are listening to Impact Hustlers and I am your host, Maiko Schaffrath. I have made it my mission to inspire the next generation of entrepreneurs to solve some of the world's biggest social and environmental problems, and for this reason, I am speaking to some of the best entrepreneurs out there who are solving problems, such as food waste, climate change, poverty and homelessness. My goal is that Impact Hustlers will inspire you, either by starting an impact business yourself, by joining the team of one or by taking a small step, whatever that may be towards being part of the solution to the world's biggest problems. Today's episode. I speak to Johann having our Henry Crossville, the co-founders of dreams leverages behavioral economics to help its users reduce debt, increased savings and invest. The app is used by close to half a million users across Sweden, Norway, and Germany. And on average users end up saving about 150 euros more per month after starting to use the app. The product of dreams is not only inspired by behavioral science, but actually the company runs also something called the dream Institute, a research Institute, allowing academics to conduct research on financial wellbeing, using the dreams platform. And instead of competing with existing banks, the company follows the strategy of collaboration established players, such as BNP, Paribas, and AXA investment managers. And at the moment, dreams has about 80 people working for them across.com Oslo. And then, and it's really good to have both co-founders here on the show today. Johan and Henrik. Welcome.

Johan Henminger: 1:52

thank you very much. Thanks for having us.

Henrik Rosvall: 1:55

Nice to be

Maiko Schaffrath: 1:55

really good to meet you. I think dreams fits quite well into the category of apps that help millennials save money. That's I think how probably a lot of investors or people in the startup space. What describe you? Do you think millennials are fundamentally bad at savings? And if so, why? Why is that the case?

Henrik Rosvall: 2:14

I don't think that there are particularly worse than others in saving, but they have so many attractions that doesn't help them save that kind of shifts focus. So looking at this generation, they've been brought up in a, kind of a frictionless consumption society where it's so easy to consume, and it's so easy to consume for money that you don't even have. Just looking at the buy now pay later at movement across the world. And they also face a few other challenges like getting into the housing market that has always been in previous generation. Something that has been a very clear focus, but for this generation, a lot of people think that is impossible to reach. That is a goal that is impossible. That is outside of the equation. So they live much more on a kind of paycheck to paycheck from a mentality perspective. And when you're, when you actually can buy things now, and then pay later that you use a lot more of your disposable income to actually pay off interest rate the number of cessation or cause you have loans, which hinders you to actually save and invest money. Long-term. It's a lot of that kind of focus that we're trying to be an opponent to basically to help them get back on track. So I don't think it's particularly in the mental space, but there are so many other things that it's attracting them to actually spend the money that they have.

Maiko Schaffrath: 3:30

So I guess the goal you're having is making savings and investment actually easier than getting into debt. Is that the goal you have? H how do you achieve that with dreams? How does that work?

Henrik Rosvall: 3:39

If you look at savings to start saving with your bank, if I ask you, how do you start saving with the bank? You basically, yeah. You have to start a savings account or an investment account but then how do you actually start saving. And I think that is a position of perspective. Banks don't really help people save more money. They help people with money to actually invest the money that they have to grow the investments or the grow, the money that you actually have. But that is starting the user journey quite late. So we want to start the user journey, right from the beginning to help people actually find the money so they can actually save, invest or pay off their debts. So that is what we're doing, starting the user journey a lot earlier. And those, because we're also targeting the younger audience the ones between 20 and 40 that are facing this these challenges. But looking at this from a macro perspective I think these are the audience that also. Are facing very very different challenges compared to all the generations just look at our pension system. The pension system was created like in the 1950s and doesn't really take care of an aging population today and will not be able to get the forum, even all the population when. We grow older or when our kids grow older the housing market has boomed. That, that means that you're spending a lot more on housing throughout your life. Eh and the need basically more savings to take care of that situation. So there's a lot of macro factors as well that these younger generations are facing. That previous generation hasn't been facing. And at the same time, of course, they are attracted in the, in spending a lot more money than the previous generations because it's so easy. It's so tempting.

Maiko Schaffrath: 5:20

And how does the app actually work? So if I feel like, okay, I'm a potential user. I really struggled at saving and investing. I download the app and what happens next? How do you help me? Safe number? Yeah.

Johan Henminger: 5:31

Yeah. So the basic principle of dreams is that we don't focus on the money itself, but rather your life which has done also connected to what science says that. So we start to juice the journey by defining your goal, basically, which is dreams, what your aspirations are. So that gives you a motivation and a very clear goal because these things are not, these are really tangible things within dreams. So it's it's an image that really gives you inspiration. It's a sum that gives you a clear goal. It's a date connected to it. You describe why it's important, et cetera. So you want to build a concrete. Concrete image of the future, you and then we help you to really find money that you didn't thought existed by using what we call hacks. So that means that you you give yourself Rewards for behavior changes in terms of skipping the coffee that you normally buy or bringing a lunch box to work or whatever it might be. But also obviously having automatic save hacks that helps you reach that particular sum automatically based on the duration of the dream and how fast you want to get there. Basically. So it's a combination of automatic things and a manual things where you really you envision what you want to do and you reward yourself going there.

Henrik Rosvall: 7:05

I think this is where the focus on working together with the cognitive scientists behavioral economics comes in because it's basically a bunch of nudging packaged in a very nice format. To give you an example, the thief that steals money from your salary counter moves that into your dream account once a week. Random amounts. So you don't, you should be able to surprise yourself how much money you've actually been able to say without actually having to go into the app and do a manual transfer every time. So it's a bunch of different kinds of save X that, that helps you reach your goal in time, but also helps you find the money that you can actually save or invest, or will also use to pay off that. So I think that is a core of dream. It's actually the methodology that we've created as a fundament in our platform.

Johan Henminger: 7:56

But also to your point, and I think what really differs dreams to the relationship you have to money or with your usual bank, is that normally when you log into your bank and when you looked at your transactional account, it's quite sad because in many cases you have less money than you actually thought. While when you log into dreams, you often tend to get a positive surprise. So you're rather eager to log into to see how your money grow, how your money grow over time. I think that's also a confidence boost and helps us getting a closer relationship to our customers because it's all about improvements.

Maiko Schaffrath: 8:38

Got it. Interesting. I, I think what I'd love to learn more about is I think you're quite unique and actually collaborating with existing players, right? So you're not trying to replace all the banks or I think if people look at your website, that's actually more language of collaboration. So tell us more about that. How do you think you can, or how are you actually collaborating with existing financial players and banks to make this mission a reality?

Henrik Rosvall: 9:03

So I think we're we're collaborating in two different perspectives. So it starting off in the Nordics where we started working with Orland spankin already in 2014, 2015 which is now called open banking, but we were actually integrated with our core banking platform and basically wanted to leverage on everything that they've built up for their customers. Like a strong balance sheet like investment products or risk and compliance. So we wanted to leverage on that instead of building up that within dreams without that they have. Taking the fixed cost for that. So why don't we just tap into their structure and leverage on that? So we've been collaborating with them for a very long time and we did the same thing in Norway with still the brand. And these two players also have showed us the values that we have with the sustainability is one of the core focuses. But we believe that banks will is will be an important part of the ecosystem even in the future, they have very strong balance sheets which is something that more kind of modern neobanks are struggling with. That we can leverage on in many different ways, but they also have a big customer basis. So in may we launched more of an enterprise solution or a business to business, to consumer solution where banks can actually offered dreams. To their existing customers, to be able to fight FinTech competition, to get access to younger audiences. And they don't have to build up a team that develops this themselves. They have dreams to do that for them. So we continuously develop that product and it's a seamless, and I've used the experience within that app instead of in a different, so those are two examples of how we collaborate with banks.

Maiko Schaffrath: 10:43

Got it. Got it. So you're enabling existing banks actually to plug into like your solution to make it available to their customers.

Henrik Rosvall: 10:52

Yeah. And I think one of the, one of the advantages is that we actually have been able to reach 16% of everyone between 20 and 40 years old in Sweden and Norway two small countries, unfortunately, but that is that there's 500,000 users in less than four years. And we've learned a lot from both a growth perspective, engagement and retention perspective, and also how to cross the naps a lot, the type of products. And I think that is something that they are really. A eager to learn from as well because it's not just a software as a service that doesn't have any consumers. It's a service that has improved. And in, in at least two markets,

Maiko Schaffrath: 11:29

Let's talk a bit about your business model especially I think in the UK where I'm based there's a lot of discussion around business models or fintechs and whether challenger banks can ever right. To reach profitability. And there's a lot of kind of criticism in that direction. Obviously there's banks like Monzo and Revolut that I'm trying to build themselves up as a platform and plugging into all kinds of different services, which goes into insurance and all kinds of pensions things like that. Obviously investments is a big one, which they hope to monetize. How does it work for you? Obviously you're not necessarily building. I don't know. I would love to hear from you if you think you're building a bank. And if so, like how, where do you see your, the core of your business model and monetizing the platform? What is your vision there?

Henrik Rosvall: 12:20

The, so the core in our platform is actually the service that we're providing. We're providing that service to consumers in Sweden and Norway, but we do it together with. Or banking partners. So it means that we don't have that high of an operational costs to run that business because we're basically leveraging on the, what the banks have built up in terms of infrastructure and risk and compliance. And then we have we have managed to find a way to attract customers really. At the very low cost. So I think last year we had an average customer acquisition cost of 15 euros. Proactive customer which which I think very few can be. So we've focused on kind of the more communicative more aspects and product aspects of changing the way you do your saving investments that management and then went to this different distribution model one directly to B to C. In the Nordics and I'm a bit to see outside of our own markets which means that we don't have to take all those kinds of heavy investments compared to new bank. We don't have to build up a balance sheet business. We don't have to take care of a banking license, et cetera. So it's a very different business model from that perspective. Which which I think also makes it possible to expand a lot quicker together with bank partners like BMP now where we we're launching in Ukraine, in, in the, in Q1 which is the first market. It's a super interesting market with a lot of younger people, a lot of saving needs. They're really looking at the growth of the countries. It's amazing. From that perspective, I think we can also expand a lot quicker than we could if we had the, and the consumer relationship, because we need to acquire customers. We need to deal with licensing in different countries. And it banking is not a very scalable model. It's not. Some products in banking, but not all.

Maiko Schaffrath: 14:15

So do you end up charging the end user and then sharing the revenue with the banks? Or how does the business model actually work with the banks?

Henrik Rosvall: 14:22

no, the business model is a pure SaaS model. So you play for accessing the platform and then you pay for the number of users that you have on the platform. So it doesn't have any revenue share at all. So it's just like a, basically a core banking system for the bank. They licensed the platform and then they pay per usage.

Maiko Schaffrath: 14:40

Let's talk a bit about your founder journey. I think both of you obviously and going back to the early days of dreams a few years ago I'd be keen to understand for both of you actually how you first came across this problem of. Helping people save money, invest money, and reduce it. That's how did he come across this? Obviously you've both actually been and a startup ecosystem for a while as well. So how did we come across that? And how did you both come together to find a solution?

Henrik Rosvall: 15:07

Yeah, I can start because I was I was heading up the marketing for the biggest online bank in Sweden Avanza for five years I realized that the current bank suppliers. Didn't really target people with less money to invest. Their user journey started a lot later. Like how can we help people invest the money that they already have? And then looking at the the different segments on the market, the big population doesn't have a lot of money to invest. So basically 7%, 70% doesn't. So who's targeting these people. So it was the incumbents, but they all target everyone with the same kind of product and offering it's one size fits all. Eh, looking at the trends in, in, in the end business the niche banks targeted specific kind of enthusiastic crowds that love saving investment. And it's a tra, but who was targeting the mass market to save, invest, save, and invest. And so that was the angle that I saw that it was a hole in the market. And then you want an, I were skiing buddies, so we used to ski together. We did less of that now, but

Maiko Schaffrath: 16:09

for that anymore. Building

Johan Henminger: 16:10

Don't talk about that. Now,

Henrik Rosvall: 16:11

w we need to improve at that point, but. And on that Yuan was a successful entrepreneur within the kind of the digital space, creating digital user experiences for a lot of companies. So you can tell that story you want, but anyway so I come from banking. I'm the boring. Boring person here. And then the Yuan was the, the entrepreneur in

Johan Henminger: 16:35

I'm the fun guy then?

Henrik Rosvall: 16:36

So he's the fun guy. And he had the ecosystem of product persons in his network. That's why we joined forces to build a new type of banking experience. But do you want, maybe you

Johan Henminger: 16:47

My, yeah, so I started a digital agency back in 2009 and there was, this was quite. Right after the app store was launched. And we all know what happened after that. What drove the behavioral change? But starting an agency where no one wants to buy your services. That was quite, that was reality back then, because right now the mobile is in the center of our heart, in the center of our lives, but that was not the case back then, obviously, which also meant that big companies didn't really want to invest in it. So the only way we could go about it was to join forces with different ad agencies. So in the beginning, it was all about the user experience. How can we through a new kind of mobile experience, make things more easy, fun, and inspirational. So we started a company teaming up with a lot of ad agencies and then almost every quarter we pivoted started to work more with strategy. Taking care of the entire digital ecosystem, not only native apps, but we started, it started as an app company where app production agency and ended up more of as a full service digital agency that was then sold to a British ad agency called BBH. So that was to your point. I like my angle into this was that I never thought I would end up in the financial industry. Never, ever. So my trigger point was rather, how could you trigger behavioral change and how can we make a mobile experience highly inspirational within the financial sector.

Maiko Schaffrath: 18:30

And W what type of work did he do in the beginning to make sure you validated the problem that you just go ahead and build something? Or how do you make sure that you've got it right in terms of your product?

Henrik Rosvall: 18:41

I remember I walked down the, the busy shopping street in in Stockholm asking people around them, people like, okay, eh, I asked him once with it. Coffee mug in their hand, like w what do you prefer the most going to New York a weekend once a year, or having a cup of coffee on the way to work once a day. And they all answered going to New York, but they still behave in a different way. So they still bought the coffee on the way to work. So that was a disconnect between kind of knowledge and beliefs and the wants and behavior. And then I asked him like, what if it was an app that helped you actually change that behavior? So you could go to New York once a year with your friends. Would you use that app and the yeah. I think I would. And we started that kind of use the testing journey. Basically with post-it notes mocking up a super simple, it used the journey and and that was the starting point to get the product market fit through at least the hypothesis on the product market fit and love. We started building prototypes.

Maiko Schaffrath: 19:49

And then you obviously needed to find a banking partner as well, and a half to be regulated space. That you've done early on, looked out for partner once you've validated it and launched quite quickly after that or how did it go?

Henrik Rosvall: 20:02

Yeah. Finding a bank partner, to be honest, that wasn't the easiest thing because I think they wanted to have the service. Some of them wanted to to really early on the choir, the idea, and having us work internally in the bank to create this or they said we would not learn our balance sheet to an external player. That was like a big no-no. But we found we found this very entrepreneurial bank all on spine that kind of had a belief that everyone should do what they're best at. And the CEO is is very progressive. The. Comes home from a very entrepreneurial family, like us and the idea of helping people to actually save instead of just spending money that they didn't have. So really bought into our purpose why we're creating dreams. I wanted to be a part of that. I think that was very brave of him and his company. That was the starting point of that. Johnny, but I met with basically every bank in Sweden, everyone with a banking license. And we ended up with the biggest, one of the biggest private banking bank system.

Johan Henminger: 21:02

But it was a long journey emotional journey.

Maiko Schaffrath: 21:06

I can imagine. I can imagine. Yeah. Let's talk a bit about that. Obviously any entrepreneur journey has ups and downs, and I think in the best of companies, you have these moments in your company history where you almost feel like, Oh God, everything is crashing down. And then you have other moments where you're like, okay, we're going to dominate the world. Everything is great. So let's talk a bit about the challenges. What do you think have been some of the toughest challenges that you had to overcome and what would your advice be to people starting out, especially in the financial space to maybe avoid making some of the mistakes that you made potentially

Henrik Rosvall: 21:45

I think something that we've been talking a lot about me and you, one is that, eh, naivety is extremely important because if you know how complex banking is, then you wouldn't start to FinTech. So you need to be naive in that way that you think you can and overcome those obstacles, or, eh, you shouldn't even know about the obstacles and you just have to fight your way through them. So stay naive and just find solutions and being be creative. I think persistence is another thing. Just looking at the time we span meeting banks I spent a year. Basically doing that. So you need persistence and you need to be very convinced that you are on the right track and never give up. So I think being that resistance to fear, having that resistance to failure is important as well. Just keep going. Because if you have that you will succeed. That's at least my belief

Johan Henminger: 22:37

to your point we as everyone else, we have faced a lot of difficulties painful parts of the story of provisionally, but. One thing that has been critical for us, of course, has been the fact that we had each other or from the beginning. Really giving energy the helping, helping each other because it's the only thing you know, is that you will hit walls and then having someone that can help you get over it is critical. Not being alone. Even though you have board members and you have a big organization having that kind of dynamic between two founders has been incredibly important for us.

Maiko Schaffrath: 23:18

What's your advice there? Ideally start a company with a skiing buddy, or how do you build like strong co-founder relationships that you really build? Like undestructible co-founding team.

Henrik Rosvall: 23:30

No, but I think one, one thing you need to look for is someone that basically it's opposite to yourself. But also have a hundred percent trust. Like psychological safety is the key element. You need to be able to go through ups and downs and you need to be able to yell at each other. And then in the next second, the best part is again. So you need to have the psychological safety and not be judging. Yeah, basically. And I think that has really been the key ingredient to my, a nuanced relationship. We can disagree and we disagree a lot, but we can also agree to disagree and without too much emotions involved. Finding someone,

Johan Henminger: 24:10

have some, we have emotions as well. I promise.

Maiko Schaffrath: 24:15

Yeah.

Johan Henminger: 24:17

Yeah. I'm the emotional guy. Yeah.

Maiko Schaffrath: 24:19

It's I think a sort of constructive friction as well, where ideally obviously by disagreeing or like debating you get to the best solution in the end, or even if you make the mistakes, you can have to trust that you're learning from them. And your history of dreams, doc looking back now, do you see that this has been like a defining moment where. Maybe you'll learn the lesson or you made a decision that you're looking back like, Oh wow. That's, what's really defining for us. Anything that, that comes to mind.

Henrik Rosvall: 24:49

I think definitely when we closed our first banking partner with all us bank. And I think that was a defining moment. And we saw that we actually launched within five months after that after we initiated that dialogue. So it went really fast. So that gave us really confidence to keep building our product and start investing really and building up. But I think one of the defining moments was also in the beginning, we had a bit of a challenge is getting customers because we got to be able to test them and we converted them. But then we hit. Some kind of invisible wall because we targeted the same people as the beta testers, but they were not the core target audience. And then we started elaborate with the different types of segments and suddenly we just saw a lot of women liking our product. And they were very social in, in kind of social networks and started talking about the products. So from what, from one month to another, like when we reached 10,000 users then and that took us a few months and then suddenly we gained like 10,000 users in a few weeks. So w we hit that kind of, we hit that threshold. Where the networking effects started to work for us in our favor. And that was, that would reach females. I think that was a, that was also a really important moment for us realizing that our target audience was females. At least in the beginning. I don't know. You want to do you agree with me?

Johan Henminger: 26:19

I totally agree. We have 70% of our user base right now are women, which is something that we're incredibly proud about. But to your point, and it took a while until we really noticed w cracked the secret sauce so that the women have really been the driving force in growing dreams.

Henrik Rosvall: 26:37

And I think that came from from an early decision, we wanted to build a diverse company culture. We wanted to to have different genders, of course different nationalities, different religions, because we believe that we can cater for a lot. Y the target audience, if we actually have these people developing the product, but we didn't expect to see it that. And that quickly but I think that was the result of having female UX designers or product managers or whatever. I think that came came through and really created the different user experience. Yeah, that was a defining moment for us.

Maiko Schaffrath: 27:13

really interesting to hear. Especially you making diversity a priority where obviously your co-founding team of two guys. And you're finding out like, okay, you actually need like diverse team to make sure that we're actually catering to the customers that love us most. Really interesting to hear.

Henrik Rosvall: 27:30

Just one thing on the diversity, I think I think looking at banks and looking at a lot of fintechs they're they they have guys coming from the financial industry. They know the product really well. They know the ins and outs of the financial products and they're building products for people like themselves, but in a better way they talk about savings. They talk about investments that talk about financial matters. I think we came from a totally different angle. We named our company dreams to avoid talking about finances. We wanted to talk about life. We wanted to talk about what's important. In life hounds the dreams. So I think it shines through the whole company that we, we look at ourselves more like a lifestyle company than a financial brand, basically because we help people achieve things in life. And after all saving is just postpone consumption. And that's what we're talking about. Postponing consumption to reach strips.

Maiko Schaffrath: 28:26

I got one last question for you and this is about the future. But would love to get both of your perspectives on it. If you think about the next 10 years the future of dreams how do you think the world will look like in 10 years stream succeeds, your plans become reality. Where are we in? 10 years.

Johan Henminger: 28:43

I think we managed to help a lot of people. Take control of their financial lives, which means financial wellbeing having a financial confidence to believe in their selves and to have a positive attitude towards money because history wise it has been quite tough, boring, and excited, driven to save money for a lot of people to just feel that you are in control of your money. And basically of your life which has to do with confidence a lot. So I think that is something that feeling good about money is something that I think we will really be able to to do help too.

Henrik Rosvall: 29:27

I agree with you on that. Of course, that is a core of our strategy as well. Really increased financial wellbeing of people around the world. But I think we'll see dreams in a lot more markets especially through our banking partners. I think we will have a lot of data that we can utilize to improve their financial wellbeing a lot quicker than an a competitor. Can do, because we have a practice for a very long time and our methodology has really improved over time helping people to save more money than they thought was possible. I think what's interesting is what you can do with those savings. And I think that in the future, that will be a broader spectrum of financial products, but maybe also other types of products that they can utilize those savings for. But the core is the methodology to keep investing in the methodology and see how that can actually affect that have a positive effect on people around the world.

Maiko Schaffrath: 30:23

Thank you very much for joining me today. It was really inspiring to listen to you and your take on this space. I found a really interesting, we actually had one of the founders of plum in the UK on the show before I. Met a lot of different founders in this space. And I think it's really interesting how unique your perspective on the spaces and how you brand yourself as well. Really yeah, as you say, as a kind of brand that enabled lifestyles and personal goals and dreams it's been really inspiring to listen to you and thanks very much for joining us today and joining me today. Thank you.

Johan Henminger: 30:58

you for having us.

Henrik Rosvall: 30:59

thank you so much, Michael. Thanks for having us.