The annual Silicon Valley Finovate show can always be relied upon for witnessing unconventional approaches to financial technology. The recent event lived up to that standard.
The first day saw some outstanding propositions from companies looking to help disadvantaged consumers, either directly or through charities.
MoneyAmigo is targeted at people with low income and poor credit to give them access to services including a debit card with unlimited 1 per cent cashback, 0 per cent APR 10-day loans of up to $100, unlimited tele-medical and dental services with no co-pay.
The company has identified that around 40 per cent of an individual’s expenditure can be processed via card payments, so that 1 per cent cashback can add up to a worthwhile amount in a year. Half of the 1 per cent goes straight back to the customer, with the other held in an account in which they can accumulate an emergency fund.
The banking app has a stunning user interface with no more than three clicks needed to access information or transfer money. While not all of the MoneyAmigo service would necessarily work in the UK, there are some valuable lessons in their approach.
Live, Give, Save – or Spave as it is also known – has evolved the micro-saving concept to embrace charitable giving. In addition to being able to add a small percentage to every payment a person makes using a given card in order to save, they can also nominate a charity they would want to give to in a similar way.
Adding small amounts to payments made is becoming an increasingly popular way to save. The Acorns service, which offers a similar proposition but without the philanthropy, has attracted more than three million accounts in the US and another 150,000 in Australia, where it recently rebranded as Raiz Invest.
There is no doubting the passion of Spave chief executive Susan Langer, who identifies female baby boomers, millennials and Hispanics as the groups most likely to embrace her approach to micro-saving in the US.
Clearly, people in the UK are thinking along similar lines. Online digital banking alternative Revolut also announced last week it is looking for partnerships with charities for its micro-savings service Vault.
Since its launch in April, more than 150,000 UK consumers have saved more than £5m in spare change with it. I hear many people challenging the viability of the micro-savings model, but the number of small savers they are beginning to attract is significant.
That said, Spave has a global patent on the process of matching micro-savings with charitable donations, so Revolut may have Hobson’s choice here when it comes to partners.
The compelling presentations of the second day were those that focused on how consumers can better manage their day-to-day money. In doing this, they are given more capacity to save in the long term.
Status Money pulls together information on income, spending, debt, net worth investments, retirement savings and credit score from a range of data sources.
The new technology could make firms like Moneysupermarket and Compare The Market obsolete
It enables consumers to compare their personal situation with millions like them and obtain algorithmic recommendations to help them make the right financial decisions.
In creating the analysis, Status Money tells me it has access to financial data covering approximately 5 per cent of the US population. I should stress other consumers’ data is anonymised, so there is no confidentiality risk.
It comes up with actionable insights to help consumers understand when and where they can find better value products.
Harnessing data in this way has huge potential to improve customer outcomes and could transform the aggregator market. It might make companies like Moneysupermarket and Compare The Market obsolete; or, alternatively, such firms could use this technology to evolve their proposition further.
Wealthucare is an algorithm-driven financial planning service designed to be delivered via employers.
As soon as a user starts to put in data, the service begins giving simple financial planning type recommendations and helps them build financial goals.
At a cost $15 per employee per month, it is easy to see how a UK version could be covered within the tax-free financial advice allowance.
While the above may not seem immediately relevant to traditional advice, we do need to find new ways of working if we are to make it affordable for the masses. The above can teach us important lessons.
Ian McKenna is director at Finance & Technology Research Centre