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After recently moving from a one-bedroom apartment in Seattle to a three-bedroom house in St. Louis, Tom Ferri and his wife have a long list of items they want to buy for their new home. Rather than rack up thousands of dollars in credit card debt, though, the couple opened an account with SmartyPig LLC to save for what they want.

“We have multiple goals we want to achieve over the next year, like more furnishings for the house, outdoor equipment like a lawn mower,” said Ferri, a 24-year-old industrial engineer.

Ferri is among people in 45 states who have opened accounts with Des Moines-based SmartyPig since its launch on March 10. Users establish one or more savings goals when they open one of the federally insured bank accounts; they can also choose to make their goals public so that friends or family members can contribute to the account.

Once the goal is achieved, the accountholder can cash out with a debit card or receive a gift card through any of more than two dozen retail partners, among them Amazon.com Inc., The Home Depot and Pier One Imports Inc.

As another savings incentive, SmartyPig sells gift cards that allow any person or organization to provide a “gift of savings.” The face value of the card, available in $25, $50, $100 and $500 denominations, can only be redeemed by the recipient after setting up a SmartyPig account and reaching a savings goal.

The start-up’s founders, Mike Ferrari and Jon Gaskell, are attracting attention from personal-finance blogs across the country as a nimble, customer service-oriented business with a timely, novel product. The concept is particularly appealing to younger people. Nearly six out of 10 SmartyPig users are 35 years old or younger, say the founders, who aren’t disclosing how many people have signed up.

Within the first couple of weeks, the partners quickly reacted to customer criticism by eliminating a $4.95 fee transfer fee on contributions to SmartyPig accounts by non-account-holders. They also got rid of a $25 fee for receiving savings proceeds by check rather than a debit card or retail gift card.

They’ve even worked with a mother who wanted to find a way to temporarily turn off her children’s SmartyPig accounts – which she set up to pay their allowances – if they’ve been acting badly.

A story to tell

Gaskell, a media professional and former owner of CityView and the now-defunct Pointblank, and Ferrari, a Web designer who had worked for The Integer Group, say they’re financing the company with their own money and from investments by friends and family members. West Bank, SmartyPig’s banking partner, also has an equity stake in the company.

Creating a financial services company really wasn’t an extreme career shift, Gaskell said.

“I think that there are some similarities,” he said. “I am helping to tell a story, and it’s a compelling story. To a certain extent, it’s already changing the way people think about their finances. … Our message of getting things back to the way they used to be, reversing the mindset of ‘buy now and pay later’ which credit cards have gotten people into, is resonating from one end of the country to another.”

SmartyPig’s strategic partners also include DataVision Inc., a Carlisle-based online security company whose customers include some of the country’s largest banks. Maritz Inc., a St. Louis-based marketing and sales incentive company, handles Smarty-Pig’s rewards card program. Its Web designer is Happy Cog Studios, a Web design company with offices in New York City and Philadelphia.

By partnering with carefully selected businesses on both a local and national basis, SmartyPig can respond to business opportunities at a pace that no large bank or financial services could match, Ferrari said.

“We had probably one of the largest financial companies in the country say to us, ‘This is an incredible idea, but unfortunately, if you were to partner with us, by the time we chew it up and spit it out, you probably wouldn’t be too happy with the end result.’ So they realized their limitations with such an aggressive idea.”

SmartyPig’s concept quickly passed muster with Happy Cog, which Gaskell approached to handle the Web site’s design.

“It was very attractive,” said Greg Hoy, president of Happy Cog Philadelphia. “They seemed to have all of their ducks in a row, whereas some of our (start-up) clients struggle to figure out what their next step will be.”

SmartyPig is the “first site we’ve encountered in the financial space that really tries to maximize the social interaction component,” Hoy said. “We have a familiarity with helping clients maximize the social interaction component, but never in a banking realm before.”

Innovative product

West Bank CEO Tom Stanberry said his institution is “very confident” SmartyPig will be successful, in part because it’s adding the social networking element and gift-card component to Internet banking, the latter being a product that’s already proved to be successful.

“In banking, you don’t see a lot of innovative products coming out,” he said. “I think this is one time when banking has been able to appeal to Internet users as well as Gen-X and Gen-Y.”

West Bank will profit from Smarty-Pig accounts, just as it does with any other accounts, through the interest-rate spread on those deposits, Stanberry said. The bank has complete discretion on the interest rate offered, which is now set at an introductory 4.3 percent.

“We are monitoring rates being offered by Internet banks all across the country,” Stanberry said. “Eventually the rate will mirror those rates.” Additionally, the bank expects its equity position in SmartyPig will appreciate over time, and that it will profit from providing other banking products to SmartyPig clients, he said.

Similarly, a Maritz representative said the SmartyPig alliance is a good strategic fit. Some of the participating retailers are offering “incentive boosts” in which they’ll provide an extra amount, say $125, onto the value of a $2,500 card.

“What we’re really excited about is the immediate interest (by SmartyPig customers) in the gift-card side,” said Kelly Cassidy, a Maritz account manager. Maritz represents more than 200 major retailers in offering gift-card programs. To date, 26 retailers have signed on as SmartyPig gift card partners.

Will accountholders be as keen on SmartyPig if the interest rate is lowered? Ferri said the incentive boost from retailers would outweigh that disadvantage for him.

“As long as I stick with a goal of something I want to buy through a retailer, it probably wouldn’t matter,” he said, “because they give a pretty good boost. That’s a pretty big incentive.”

Having signed up for an account when the $4.95 fee was in place, Ferri said he hadn’t planned on inviting friends or family to contribute to his account.

But now that SmartyPig has eliminated those fees, “I may branch out and say, ‘Hey, my birthday is coming up. I’m saving for a lawn mower.'”