Decoding the Financial Psyche of Millenials
Millenials have come of age during an era of technological innovation, economic disruption and globalization. They operate with a different set of behaviors and experiences than their parents. And no, they aren’t the entitled, job-hopping, avocado-toast-munching, starbucks-soy-latte sipping generation that they’re being generalised to be. They are, however, a generation that is struggling with money management. Most young working adults aren’t saving; in fact, quite a few are dissaving, especially in the Western World. And of those that do save, the majority have insignificant savings and most aren’t investing at all.
Interestingly enough, the millennials do want to be good savers when they are in a position to do so, but a vast majority is hampered by an unforgiving economic environment featuring lower incomes, low job security, high student debts and escalating real estate prices. While this situation might be exacerbated in US and Europe, the situation for millenials is dire worldwide. And then what? They end up feeling like they can’t save, and even if they could, they feel like that don’t have the capacity to invest time into saving, that they don’t have the knowledge or the capital required to even begin with.
Further, millenials are digital natives and are most open to using non-traditional financial institutions. As a result, banks are struggling to engage with them even though this is the demographic that will be the key banking customers of the future.
We’ve established that millenials are struggling with saving, and more importantly, investing for the future. We’ve also established that traditional banks are struggling with connecting with their future key customers – millennials. It is at this juncture, that Limitless, a white-label, spendings based micro-investment application comes in.
Limitless: “You Spend, You Invest”
Limitless is a savings and investments app for Millennials (born between 1980 to mid/late 90s) that works by moving a small percentage of everything spent (on any card issued by any bank, or any other non-cash payments) from the user’s main bank account into an investment account held at Limitless’ partner bank. From there, the savings are sent out into one of 3 basic portfolios of diversified, low-cost funds.
Rainy day savings, emergency funds, larger ticket purchases, or medium term goals – this app engages the user in a simple manner: Using short-term goal based targets, the app builds a sense of accomplishment and encourages long-term savings and investment habits in its users. Additionally, the app is engineered with an automatically categorized spending tracker and account aggregator, if the user has multiple bank and card accounts.
Savings as a Percentage of Spending
The Limitless app’s model for savings, caters to the lifestyles of millenials and the emergence of the gig economy, where an increasing number of people have irregular income streams.
The (user adjustable) model of savings also offers millennials a way to spend on things and experiences that matter to them. More importantly, this method helps to somewhat subconsciously modify spending behavior by acting as a ‘sales text to your future self’ – with a slightly faster falling bank balance, it reduces discretionary spending by a small amount, a crucial aspect of savings behavior which most rounding up apps miss.
Investing for the Future
YOLO: We know that millennials tend to save for shorter-term objectives. It is by hinging on this characteristic, that Limitless helps set its users up for financial freedom and long-term security. When users sign up, 80% of the money saved goes to short-term goals (weekend city breaks, for example). Having saved for such a goal, users will realise that it is indeed possible to set aside money, whilst still going at it and leading the life that they want to. So this chunk of money saved goes to ultra-safe deposit, or money market accounts. Only 20% of the money saved will go to portfolio ETFs. Over time, the portfolio will be added to, in small amounts.
Generally speaking (unless something catastrophic happens in the markets) there will be more money in that investment portfolio at the end of the year, than at the beginning. Of course, the fun goes also hand in hand with learning to accept some volatility. As comfort levels with this whole idea of ‘investing for the future; grows, Limitless nudges users to raise the percentage of their savings going into investments.
Uniquely Limitless: B2B(2C) Financial Technology
“Limitless engages Millennials with goal-based savings while keeping the complexity and cost of investing extremely low. This is done through partnering with forward thinking banks who can engage with their customers and monetise data actively shared with them, rather than slapping on return-sapping charges and fees as B2C players have to.” – Ka-Ming Lim, Co-Founder
Limitless has launched a version of its application with customers of bunq, a European challenger bank, in September last year, to improve the app and customer experience with users from 14 countries across Europe. The magic is in their B2B(2C) Fintech business model. Partner banks provide their (and their competitors’) customers, with the Limitless app and a very low-cost investment service based on ETFs essentially for free. In turn, Limitless provides users a powerful customer experience and engagement platform, tailored to the millenial psyche.
As one of the startups in the TFI Accelerator Growth track, Limitless is on a mission to financially empower millennials.
“Joining TFI was an unmissable chance to work with a talented team backed by world class partners to make a real difference in people’s lives. Helping Millennials towards financial freedom is in our DNA, and the passion of our partners and our fellow scale-ups to make this happen has been enormously energizing! We are raising funds to grow the team, partner with more banks in more countries and pursue new growth avenues.” – Ka-Ming Lim, Co-Founder
Got any questions for the entrepreneurs behind Limitless? Get connected with them!