For all that is written about the apparently unique millennial generation and their tech-proficiency, you’d struggle to find anyone suggesting they have money to invest in stocks. Bearing the brunt of last decade’s financial crisis, millennials have been consigned to being the first generation in history to earn less than their parents and many won’t consider buying property until they’re significantly advanced in their careers.
But emerging financial technology, coupled with an ingenious system for moneysaving, is encouraging those without notable savings to put their money to work on the market. The Moneybox app, which links with an online bank account, allows users to round up their card payments to the nearest pound. The company use the example of a morning coffee costing £1.80 - with Moneybox the coffee can cost £2 and see 20p deposited in savings every time. According to the startup, the ‘typical user of the app makes about 30 transactions a week, with an average roundup of 28p. This adds up to £8.40 a week, or £440 a year, just by saving your spare change.’
The idea of setting aside £8.40 a week might not be that appealing to the cash-strapped millennial, but when subsidised with the occasional lump payment the value of investing can become clear. The app cite their own research into millennial saving habits as validation for their product, with under-35s choosing cash ISAs over stocks and shares on 95% of occasions, despite their relatively dreadful interest rates. The company found that the main barrier to investment is the perception that it’s a complex process, or that it’s initially expensive. Moneybox looks to address these concerns and, as the Financial Times put it, ‘demystify the stock market.’
‘We want to make saving and investing easy and engaging,’ Moneybox’s Ben Stanway said. ‘By enabling users to get started investing with just £1 and making the investment options clear and simple we hope that Moneybox can help more and more people achieve their long-term financial goals.’
In January, Moneybox closed a $3 million funding round, and the app officially launched at the end of August. The startup is just one of a range of FinTech newcomers looking to marry technology with banking, streamlining processes and exploiting peer to peer in a way that could threaten the banking industry at large. What sets these startups apart from the larger incumbents is their tech-first approach. Facial recognition, a more personalized experience, 24/7 digital support - tech-savvy FinTech startups can quickly offer things that would take large, traditional banks far longer to implement.
It’s a trend created largely by and for millennials. As mobile phone apps become the number one way to manage one’s finances, and 86% of millennials aged 25 to 34 are smartphone users, they will be the early adopters of FinTech. And, given that there has arguably never been such a lack of trust in the traditional banking sector, the switch to more independent, peer-to-peer focussed personal financial solutions could be swift and not easily reversed. Moneybox’s innovative approach to investment is just the beginning - a plethora of FinTech offerings are springing up at pace, and everything suggests millennials will welcome them with open arms. After all, among millennials’ 10 least-loved brands, you’ll find all four leading banks.