EXCLUSIVE – Young Americans are bad when it comes to setting aside money for retirement. Those savings numbers decline even further when considering the Hispanic population, according to a new study by IRA savings platform, Finhabits. The solution? Well, that’s exactly what New York-based fintech startup is hoping to provide.
Launched in February by former Merrill Lynch alumni Carlos Garcia, the digital savings platforms is geared towards encouraging nonwhite consumers among the 30 and 40 age range to save up for retirement. The emphasis is on the country’s Hispanic population as is evident in the platform’s bilingual presentation.
“The majority of the population [in America] is nonwhite and most traditional financial firms have failed to attract this multicultural household,” Garcia told Bank Innovation.
In fact, according to a report published by Finhabits today, in five of the most Hispanic metro areas in the country, only 4% of small businesses (100 employees or less) offered retirement plans to their employees, compared to 11% in the five least Hispanic metro areas in the report. See full report here.
“Our goal in launching Finhabits was to make financial savings tools such as IRA more inclusive and multicultural,” Garcia said. “We provide our users with a long-term high-quality financial product that requires a conscious interaction on their part.”
Finhabits has a simple signup process online or on its mobile app. The mobile app is free and available on both iOS and Android. Once the user has signed up and their identity is verified, the website requires them to select a goal (long/short term saving goal, IRA, etc).
Once that goal is selected, Finhabits presents the user with a few customized options for saving or investing in a ETF portfolio, Garcia explained.
Users can save as little as $5 per week through direct deposit by linking their banking account. While the app is free, Finhabits charges a fee of $1 for investments under $2,500 or .05% per year for accounts over that amount.
When it comes to investing, Finhabits has partnered with Vanguard and BlackRock to provide diversified ETFs portfolio options for investing. There is a fee associated with investing in these portfolios, Garcia said.
The average Finhabits user is 36 years old with an annual income of $40K-$75K, and invests about $40 per week.
The platform is intuitive, Garcia said. If a user doesn’t have enough funds in his/her account to make a deposit for a specific week or if by making that deposit the user will incur an overdraft, Finhabits skips that week’s payment and notifies the user for the reason, he said.
“The key issue in the industry,” Garcia said “is it thrives on complexity. That allows it to feed the people in the middle so that can explain things to customers. Things are not simple or accessible. That’s our goal.”
As for 2018, Finhabits plans to expand its product and services. While Garcia could not disclose specific products in its pipeline, he said the focus will be around long-term savings such as college savings – for instance.
“We are not going to look at features like money transfer or budgeting tools,” he said.
As for funding, the company is in the works on this front, and hoping to announce something on this in Q2.
To learn more about the latest developments in digital lending and mobile banking, join us on March 5-6, 2018 at the Parc 55 in San Francisco for Bank Innovation 2018. Click here to register.