As 2019 drew to a close, a team of banking, finance and technology experts, together with California-based HMBradley Inc., launched HMBradley, a digital-banking platform. The intent: to reward users for positive financial behaviours.
The new service, backed by fintech heavyweights including PayPal Inc. co-founder Max Levchin (now CEO of Affirm Inc.), will do this by offering the banking industry’s highest interest rates to accountholders who save a portion of their monthly deposits, regardless of how much money they earn.
“[HMBradley] was developed to help consumers be more responsible with their money,” Levchin stated in a release announcing the new venture.
HMBradley Inc. may be ushering in a new year by disrupting the banking landscape, but the fintech explosion is not new. What is new is the focus on consumer services and enabling consumers to save and invest their hard-earned dollars.
“Canadians are becoming less focused on simply managing a portfolio and generating returns, and more interested in making sure they have enough through more advice-driven and goal-based approaches and coaching,” says Stéphanie Rousseau, a spokesperson with National Bank of Canada in Montreal.
New apps, services and mobile options are not only changing the way consumers and investors manage money, but also changing the expectations they have about saving and spending. Many of the new offerings originate in the U.S. and, at least initially, operate there exclusively.
Earny Inc., based in California, is one. The firm’s app helps shoppers get the best price for a purchase – even after they have paid for a product. “We empower consumers with the ability to save,” says Oded Vakrat, Earny’s CEO. “Our intention is to ensure you never leave money on the table.”
Agreements with retailers, including the top 20 retailers in the U.S., enables Earny to monitor prices and offer refunds when a price drops shortly after purchase. Earny users have collectively saved $4 billion to date, says Vakrat. “Every month, we find a few million in savings for consumers.”
The Earny app, which also includes hotel services, has more than three million users.
The ability to save appears to draw many users who would fall outside the reach of investment firms and financial advisors to contemporary fintech. The Acorns app, for example, helps users invest, save and spend responsibly for just $1, $2 or $3 per month. Acorns Securities LLC, based in California, promises “no surprise fees, just surprise upgrades.” The app rounds up debit and credit card purchases and invests the difference for users. The appeal is far-reaching: with 6.2 million users, the Acorns app is the fastest- growing financial-wellness system and leading micro-investment app in the U.S.
Insuretech is another fast-growing subset of fintech. For example, New York-based Lemonade Insurance Co. is taking an innovative approach to providing property and casualty insurance to clients. The firm, which is powered by artificial intelligence and behavioural economics, takes a fixed fee out of clients’ monthly premiums (to cover reinsurance and the expenses of running the business) and uses the rest for paying out claims. The company returns unclaimed money to clients in an annual “giveback.” The insurer insists it “gains nothing by delaying or denying claims.”
The new wave of fintech services go beyond traditional service offerings.
California-based Earnin, for example, offers an app that enables employees who are paid on a biweekly or monthly schedule to be paid daily through a micro-loan system. The app operates on the “pay what you can” model and is 95% funded through user payments, according to the company’s website.
While these fintech innovations are available only in the U.S., advisors in Canada should pay close attention to what is happening south of the border. For many firms, including Earny, expansion is on the horizon. “It is definitely on our road map to expand outside the U.S.,” says Vakrat.
Earnin also has set its sights beyond the U.S. “We’re always looking for opportunities to expand to other markets and help more people with their financial wellness,” says a spokesperson.
Vakrat encourages advisors to pay close attention to the latest fintech because clients will be reading about it, wondering about it and using it. “You need to understand these services,” he says.
Canadian financial services regulators actively encourage fintech development here at home. In 2016, the Ontario Securities Commission established OSC LaunchPad to accelerate the speed at which early-stage fintech businesses reach market viability — the first initiative of its kind among Canadian securities regulators.
And in October 2019, National Bank launched the Innovation Competition, a large-scale challenge designed to bring together Canadian fintech startups, students and other teams from across the country to develop new solutions to help consumers save more efficiently and manage their money. The first winners will be announced in April.
There’s room for innovative technology, says Rousseau, noting that National Bank intends “to build relationships and potential partnerships with the next wave of Canadian fintechs.”