The Smartypig service is based on database and security technology developed by Iowa-based DataVision. Savings accounts are held at West Bank - which is also based in Iowa - and are covered by Federal Deposit Insurance Corporation insurance.

Account owners need to be 18 years old but the service lets parents give children access to specific savings goals.

Users signing up to the service can create a profile on the site and explain their saving goal and how much money they need to raise. Customers can choose to save between $250 and $100,000.

SmartyPig then suggests a monthly contribution to be automatically deducted from the customer's bank account. There is a minimum deposit of $25 needed to start a savings goal and users can deposit a maximum of $10,000 in a 24 hour period.

In addition, users can opt to make their account public to specific people, enabling family and friends to contribute to the fund. Customers can alss add a SmartyPig "widget" to MySpace and Facebook pages so their contacts can contribute to the fund.

Once users have reached the savings target they can receive the fund and interest on a SmartyPig debit card, which can be used anywhere MasterCard is accepted, including ATMs.

Customers can also request their money on a gift card from partner retailers - including Amazon, Bloomingdales, Gap and Macy's - which offer an additional "incentive boost" of up to five per cent on top of the amount saved.

Explaining the reason for setting up SmartyPig, co-founders Mike Ferrari and Jon Gaskel, say on the Web site: "With credit card debt skyrocketing and an unstable economy, we strongly feel the time has never been better to help consumers get back to the basic idea of sensibly saving for the things they want in life."

SmartyPig is the latest outfit to take advantage of the Internet to challenge traditional financial institutions.

A recent study by Javelin Research & Strategy predicted that more Americans will turn to online person-to-person social lending networks to pay off credit card debt, with the amount borrowed for this purpose expected to grow from $38 billion in 2007 to $159 billion by 2012.

Another study, from consultancy Gartner, predicts social banking platforms - such as peer-to-peer lending networks like Zopa and Prosper - will grow to control 10% of the worldwide market for retail lending and financial planning by 2010.