FinTech startups providing novel ways to save (and prosper?)

  • 15 Feb
  • 2 min

There are now a number of startups that – along the lines of Acorns – offer an app that lets you automatically round up to the nearest whole unit the purchases you make and invest the 'spare change'.

Every little helps. Every penny counts. It all adds up. These hoary old sayings start to take on a whole new meaning when you look at the FinTech startups whose value proposition is to enable you to round up the price of a purchase to the nearest whole unit and invest the difference. Within just a few years, California-based Acorns has set the benchmark in this field. If a customer buys a coffee for $3.50 with his/her bank card, $4 will be taken out of his/her account and the 50 cents will be invested across a variety of investment vehicles – shares, bonds, funds, etc. – so as to achieve a decent return at a moderate risk. Acorn, which now has 2.3 million clients, has also entered into partnerships with a number of brands that will offer cash back on items purchased by the client. Other young firms are offering a similar service, give or take a few precise details. New York-based Qapital, for instance, places the emphasis on setting a specific goal such as saving for a vacation, and encourages its users to set up automatic triggers for transferring a small amount to their savings & investment account, e.g. every time your grocery store bill works out under budget, every time you get to your sports or fitness club or… whenever your favourite team wins! With both these apps, users who are not content to save simply through the price round-ups can also make direct transfers to the savings & investment account from time to time if they wish. Meanwhile the idea is also catching on outside the United States. Montreal-based Mylo recently raised close to  $US2 million and Moneybox , a UK-based startup with similar ambitions, managed to raise $3 million in seed capital last year. What all these young companies have in common is that they are particularly targeting millennials. And with Generation Y in mind, a new generation of apps are gradually appearing on the market. With names like Coinflash and Cryptonex, they also plan to enable users to invest the 'small change' from their transactions, but in crypto-currency. So far still undergoing beta testing, these new FinTech products have the advantage of only risking a few cents or pence each time in an investment known for its high volatility. Still, maybe a good way to round out your monthly paycheck?

By Sophia Qadiri