The financial technology sector has exploded over the past five years, capturing $12 billion in annual investments -- and it's poised to take trillions from established banks.
Ramya Joseph, a former investment banker on Wall Street, has been exploring how to integrate artificial intelligence with personal finance through her startup, Pefin.
On Thursday, the online platform, which aims to give financial investment advice, launched in public beta. In fewer than five minutes, Joseph says, Pefin can sync its data with your financial institution to get a holistic picture of how much you should spend and invest.
Pefin takes into account roughly two million data points (i.e., inflation, tax codes, government regulation) -- drawing regularly from the Bureau of Labor Statistics -- to project what your finances may look like in future. From there, it can help you determine when you could realistically retire, or have a child, for instance, and how those plans might impact each other. Starting in 2016, Pefin will also directly manage your long-term investment portfolios for an additional fee (a minimum investment of $50 is required.)
It may sound like a robo-advisor, but Joseph claims the service is simpler, easier to use, and much more forward-thinking. It can also learn from your behavior over time.
"Millennial finances are going to get complex, and Pefin is the one platform that can grow and keep up with you," Joseph tells Inc., calling artificial intelligence a "democratizing" force in the financial sector.
The service will be free while in beta through the end of January 2016. After that, it will cost $6 per month, and $12 after the first year. That's still a fraction of the cost of traditional wealth advisors, who typically charge an additional one percent on your assets under management.
Joseph was inspired to start the company while working on Wall Street, where she'd ascended to become a vice president at Goldman Sachs by the time she was 27. Then, the recession hit.
"My parents were about to retire and I spent many hours creating spreadsheets to help them feel secure," says Joseph. "[I realized] I should be doing more than making wealthy people wealthier."
Pefin launched quietly in 2010, taking on its first employees in 2011. It later took on undisclosed private investors, who put up a collective $5 million. The startup is hoping to do a financing round within the next year.
Though Pefin bills itself as less expensive and more personalized than traditional wealth advisors, the competition in the marketplace is stiff. Betterment, a robo-advisor that recently rolled out a 401(k) tool for small businesses (and also offers automated investment advice) surpassed $3 billion in assets under management this month, with more than 118,000 clients and $105 million in venture capital funding.
What's more, some major banks -- Bank of America, most recently, according to a Wall Street Journal report -- are temporarily refusing to integrate with tech personal finance solutions, citing security concerns with new startups. That then forces those customers to use their online services.
Joseph picks up on what she calls "the irony," of the situation: "Banks are saying, 'you're not secure enough.' But banks have been involved in some pretty big security issues. And third party aggregators? They're tech firms. They haven't been breached. It could affect us, but I think we're all getting much smarter about security," Joseph said in an interview with CNBC.
Still, Joseph is confident that her price points, and carefully honed algorithm, will be enough to win over and keep customers down the line.
"The future hinges on adopting technologies like artificial intelligence," she says.