A Geek Award winner and one of Fast Company’s 10 most innovative companies in personal finance, FeeX is not only successful, it also provides something refreshingly useful: it checks your financial account fees
Justice Louis D. Brandeis once said that “sunlight is the best disinfectant.”
He was referring to the role of a robust press in a democracy to expose and deter corruption, but he could also have been talking about bank fees.
In 2012, Waze Co-Founder Uri Levine was working as a mentor in the Zell Entrepreneurship program at the IDC Herzliya, an academic program and startup incubator at one of Israel’s private colleges. He and his student Yoav Zurel were brainstorming pain points for a startup when Levine described some trouble he had had recently with his bank.
Levine had noticed a 1,000 shekel (about $250) fee on his bank statement for something described as “guarding securities.”
“This was before he sold Waze to Google (for $1.1 billion) so $250 was a lot of money for him,” Zurel jokes with Geektime. “Uri wrote a letter to the bank asking what this fee was and all of a sudden the bank waived the fee.”
Both Levine and Zurel suspected that the bank had been counting on Levine not checking his bank statement carefully.
In fact Zurel, now the company’s CEO, claims that 60 percent of consumers don’t even open their financial statements. While we could not verify this figure, the number is certainly high, with Barclays finding that more than a third of account holders refuse to open their bank statements.
“We understood that with this email of 120 words, he was able to save $250. If that’s the case, how much fat is there in the system that consumers can slice with simple tools like emails or asking questions?”
Zurel and his co-founder David Weisz were both computer programmers who had worked at Wix before quitting their jobs to join the Zell program. They knew very little about finance.
“But we dove in. We had to learn everything from top to bottom,” Zurel reflects.
After they created the concept at Zell, they enlisted Eyal Halahmi as their fourth co-founder, who is the company’s CTO.
Towards the beginning, “We started looking into retirement accounts because these fees tend to compound for 30 years,” Zurel remembers.
Zurel asked his parents, who were in their early 60s, if they had any idea how much they had paid in fees on their retirement accounts.
“Even though they are educated consumers, they had no idea.”
Zurel and Weisz crunched the data and they learned they had paid more in retirement fees than they had on their mortgage.
“They had paid about one-third of their retirement savings in fees. They had no idea this was going on.”
The Robin Hood of Fees
One of the reasons people are unaware of how much they’re paying in financial fees is that they fail to read, or understand, the fine print.
FeeX has several amusing examples on their blog. They studied financial documents from Americans’ 401(k) bank statements and they found fees that are buried in footnotes as well as fees that would require you to read a novella length jumble of legalese to grasp.
How can a human being be expected to slog through all this? Only a robot would have the patience to read and understand this kind of paperwork.
And that was their aha moment.
Zurel and Weisz created a set of computer vision and deep learning algorithms that learned to recognize and decipher hundreds of kinds of financial documents. In Israel, they started with bank statements, pension funds and various types of savings funds.
A user would scan their financial documents, or just take a smartphone photo, upload it to FeeX, and get a response within a few hours determining how much they were overpaying. Then they could send an email to the financial institution demanding that the fees be reduced.
“The typical answer is yes,” said Zurel.
“Here in Israel there are more than 10 banks – five of them bigger – and they compete for clients. There’s a lack of transparency, but they are still afraid you’ll take your money to the competition.”
FeeX swept the Geek Awards in 2013, won best FinTech startup in 2014, and was named one of the world’s 10 most innovative companies of 2015 in personal finance by Fast Company. The startup says 100,000 Israelis have used their product so far.
“We are seeing the financial industry changing in Israel and developing new business models to cope with the new reality of consumers who are more educated. It’s not just in response to FeeX, but we played a big part.”
Coming to America
Six months ago, FeeX launched its product in the United States. They decided not to analyze bank statements for the time being, but to focus on retirement funds.
“Retirement accounts are the lowest hanging fruit in terms of the value we can create for our users in the the most efficient amount of time.”
Despite Israelis’ reputation for being fraiers (suckers), Zurel said that on the whole, Americans are being fleeced on their retirement accounts to an even greater extent than Israelis.
In Israel there are $10 billion in fees per year. In the U.S., it’s $600 billion. Percentage wise, he says, the fees in the United States are more egregious.
Who are the worst offenders?
Zurel refuses to name names. Despite calling the company the “Robin Hood of fees,” he says he is not looking for a “fight” with the financial industry.
“The main offender is the ignorance of someone who simply doesn’t know that he’s paying. Every institution in the U.S. has the capability to give you a lower fee or a higher fee. You need to know what to choose.”
Zurel gives an example FeeX has frequently encountered in Israel, of young single people who were paying for life insurance even though the beneficiaries are their (non-existent) children.
“It’s like paying car insurance when you don’t have a car. No one asked them. They just signed documents.”
But isn’t this greedy and unethical behavior?
“It’s optimization of revenues,” he says euphemistically. “I am against lack of transparency and optimizing your revenue by hiding information. That is unsustainable.”
Because of that lack of transparency, fees in the United States have quadrupled in the last three decades, Zurel points out.
How do they make money?
FeeX has raised $9.5 million so far, including from Hong Kong-based Horizons Ventures, but how does the company make money?
“We don’t,” says Zurel, “but we do plan to. Currently we are focused on our users and how to provide maximum value. Later on we will deploy some premium services.”
When asked about what FeeX does with users’ data, Zurel replies, “We don’t sell it. The only thing we do with the data is understand where the biggest chunks of fees are that people are paying.”
“For instance if one user has a financial advisor named John Smith, now we know this advisor charges this amount. Then the next user who has this advisor, if he is paying more or less we can let him know.”
Zurel also says that if a user wants, they can be totally anonymous to the system. They can use a fake email, and black out their name and personal details.
“Some users are doing that,” says Zurel, “but we don’t care who you are and we don’t save your data. We take the minimum amount of data we need to provide you with value.”
Zurel says FeeX does not have advertising but if they do in the future, it will be clearly marked, not disguised as an objective product offering.
“Our main asset is our users. And we believe in transparency. That is our DNA.”