Neobanks are succeeding where traditional banks are failing in attracting millennials to use their services via simplified mobile apps.
Neobank Acorns has more than 2 million investment accounts, and its already-demonstrated good progress has secured $70 million in Series D funding.
Acorns is a mobile app which you connect to your bank card, once connected it creates “virtual spare change”. Let’s say you spend $3.50 on a coffee, that money goes out as usual, and Acorns grabs the extra $0.50 to round the purchase up to a clean $4 spend. Acorns then adds that money to the investment account you created on the app. The money is entered into an ETF, which is a diversified portfolio of stock designed to track the performance of a certain index, like the Standard & Poors 500.
You can also set up regular or ad hoc payments, but the general idea is you get to invest your money in something which appreciates over time. Which is different to A) a savings account which doesn’t really appreciate that much anymore, and B) housing, because you can’t buy a house with your spare change. Important for the millennial generation in particular, only 9% of whom consider themselves investors.
This is the latest in a string of FinTech companies pushing for consumer-led, responsible finance products.
CEO Noah Kerner told TechCrunch , “One area of particular interest is responsible spending. It’s a huge area of concern for our customers, and part and parcel of the Acorns experience is connecting spending with responsible saving, so we’re looking at that area. Two of the big-ticket questions… How does a customer spend responsibly and what do they do with the money they have left over?”
Earlier this week neobank Monzo announced it had just over 90 of its new current accounts up and running after they received a full banking licence from UK regulators. Monzo has been characterised by the particularly honest tone in their blog pieces announcing both news and mishaps, and have even gone so far as to set up a Transparency Dashboard on their website.
The millennial generation is busier and broker than any previous generation. These kind of apps, along with plenty of others like Digit, Pocket Guard, Mint and Moven, are all aimed at the new market of millennials – the oldest of whom are just into their 30s – who seem to have come across two realisations: A) they want to work hard, play hard and live rather than be “sensible,” and B) the old order of finance companies simply aren’t clued up enough.
Read More: Neobank Moven debuts money monitoring app in UK for disillusioned millennials
In this light they’ve created a series of products which allow them to be sensible finance people with little or no effort, while giving the big banks a run for their money.