On July 6, Founder and CEO of Save, Michael Nelskyla, spoke with Bloomberg Businessweek journalists Katie Greifeld and Mike Regan about the Market Savings program. Listen to the full interview below or read the transcript following.
© 2022 Bloomberg L.P. All rights reserved. Used with permission. The following interview transcript has been edited for clarity.
Katie Greifeld: Let’s turn now to Michael Nelskyla. He is the Founder and Chief Executive Officer of Save. He joins us on the phone from Scotland. I understand quite late there. Save is an ultra high-yield investment savings account. FDIC insured. Michael, great to have you on Bloomberg Businessweek. I want to start really simple. Where did these ultra-high yields come from?
Michael Nelskyla: Thank you for having me. First of all. So just to describe Save. We’re basically a savings platform that enables better returns and you can call them high-yield potential on your FDIC-insured account.
Where do they come from? These are effectively replacing what you normally have as your interest. Your interest, typically, that you get on your account comes from a borrowing and lending activity that the bank does. So they’ll take your deposit and place it in the bank and then they’ll ultimately lend it either back to the Fed, to other banks, or to individuals through mortgages, etc. So that will be typical bank activities.
In our case, we’re just replacing that activity with investment activity. And as you are aware, every time you replace, let’s say, bonds with equity market exposure, you can expect higher returns.
Mike Regan: You know, Michael, when I hear higher yield and higher interest rates, I assume higher risk. Is there any risk here that we should know about?
Michael Nelskyla: No. Again, the deposit is fully FDIC insured. The only difference would be that you have a higher return potential, but of course, now, the risk if there is any, is that the equity markets may not perform over time. But equally, you would have seen that during COVID that rates went to zero, so that was a different market trigger, of course.
Katie Greifeld: And so who are your customers here? I mean, is this for consumers? Is this more for banks? Who are you trying to target?
Michael Nelskyla: Well, this is really for anyone and everyone looking for higher yields on their FDIC-insured savings account or any account that is in that category. If you think about where the macroeconomic factors are right now, you’ve got high inflation, you have rates that are going up, but they’re not compensating for the inflation. So you’ve got a large cohort of individuals and others looking for accounts that yield or give you a higher potential for yield.
Mike Regan: So Michael, why don’t you give us a little bit of the history of Save here. When exactly was the launch and how big is the deposit base currently?
Michael Nelskyla: Yeah, so when we launched about a year ago, we initially launched a debit card that was generating yields through transactions, which was very successful. We now have over 30,000 individuals who are customers of Save. That history in terms of creating this product really comes from learnings out of the banking world when you look at products that are out there, whether they’re in the credit card space or saving space.
When you aim to maximize the return for the customers, typically, you end up losing a lot of those gains along the way, meaning either they’re eaten up by legal costs or regulatory costs. So we built a way of allowing the deals to come directly to the customer and therefore maximizing those.
So it’s been a very big success. We’re taking on the first deposits this week or next week. And we have a base of over $150 million representing around 9,000 customers waiting to take that put in those deposits.
Katie Greifeld: And I’m curious. How to Save exactly make money in offering these ultra-high yields? What is Save’s business model?
Michael Nelskyla: Yeah. There we’ve also done it differently, meaning, if we look at any market investment out there, we wanted to introduce the concept of fairness, which means that we are effectively putting together portfolios for you. And we’re saying here’s the potential for returns. But equally, we should be responsible for those returns. And so our fee is a fee that is based on if there is a positive performance, ie if the customer is happy with the returns. So only in the case of a positive return do we charge a fee. Otherwise, our fee is zero.
Mike Regan: Michael, I know you have a background in derivatives. What kind of portfolios are we talking about here? Are they just sort of vanilla equity portfolios, or are there some options involved as well?
Michael Nelskyla: Yeah, so what we have is all ETFs. Typical ETFs, liquid ETFs, so we don’t really deviate from what you see at larger robo advisors or large wealth management accounts.
But we do have different themes and the main theme we have so far is global diversified portfolios, investing in stocks, bonds, and commodities.
What you have in parallel to that is an ESG portfolio, which we coupled with the planting of a tree for every $1,000 deposited. These trees are planted in upstate New York. So this is not very far. It’s not somewhere on the other side of the world.
And then the third one is, as we call it, alternative strategy, which is really meant to generate returns in a recessionary environment. So think of the environment where we are right now: Potential for stagflation, potential for a recession rather than a soft landing. In those cases, we aim to have an account that ultimately then generates return from a sideways or a downwards trending market.
Katie Greifeld: All right, very interesting stuff. That is Michael Nelskyla. He is the Founder and CEO of Save. He joins us on the phone from Scotland. Really appreciate you staying up late to talk to us. You’re listening to Bloomberg Businessweek. This is Bloomberg Radio. We have much more coming up.