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From small sums great savings pots grow

Limitless' new app helps people build long-term savings by putting away a little every day. It's the perfect savings plan for millennials, writes Sara Koslinska

For most millennials, some already in their thirties, saving for a rainy day is really difficult.

Low interest rates, high minimum investment thresholds and high charges have put many of them off savings products. The squeeze on wages since the 2008 financial crisis, the high cost of living and the burden of student debts haven't helped either.

In the UK, for example, the gap between the average income of a young person and what he or she would need to save for a comfortable retirement has become almost unbridgeable. A report in the Financial Times last year quoted Rebecca Taylor, director at the Chartered Institute for Securities and Investments, as saying a 25 year-old needs to save the equivalent of £800 a month for 40 years to retire at 65 on £30,000 a year. But the average monthly salary for 22-29 year-olds, according to InstantOffices, is £1,829-£1,924. There's no way they can afford the suggested rate after housing, student loans, bills, travel and food. Perhaps it's this gulf that makes young adults give up on the very idea of thrift.

Given that saving is so hard for millennials, we decided to come up with a way that makes it easy. Really easy.

Just under two years ago I met my co-founder Ka Ming Lim in Singapore, where I was working in corporate sales and development. Within 15 minutes of hearing his idea for Limitless, I wanted to be part of it. Eight months later we'd founded the company and today we have a proven app that helps people save as they spend.

The concept is simple. Users sign up to save anything between 5 percent and 20 percent of every purchase they make with their mobile phones. This money clears straight out of their current account and goes into a savings scheme.

The idea is that small amounts will build up into meaningful sums over time, especially if they are channeled into long-term investments. Being small, the user hardly notices the deductions. Think about it: 5 percent of a €4 cup of coffee is just 20 cents. But buy one every day and it adds up. The same goes for a sandwich, a drink in a bar or a takeaway.

Following our soft launch with Dutch bank Bunq in September, customers are saving on average €70 a month with Limitless. I've saved €400 in just two months.

As in any investment plan, banks must assess their customers' appetite for risk before signing them onto the app. Users are placed into one of three categories: conservative, medium, and comfortable with risk, but they can change their risk profile at any time. The bank can then offer the right savings scheme or investment product for each customer. The app will channel the sum users set aside with each purchase to the designated savings scheme.

For an annual flat fee and a small fee per active user, banks can white label our app and start helping millennials save for the future. To the bank customer, the service is free. And while we designed this for millennials, anyone can use it. It's about customer engagement and strong product delivery – two very real problems for banks that are trying to encourage millennial clients to save more.

From our conversations with banks, we learnt just how much of a challenge it is to engage with millennials, and how important this cohort of young people is for the future of their business. In the US, for example, 18 to 35 year-olds are already the biggest section of the workforce, according to Pew Research Centre.

If banks could only sign up millennials to a long-term savings account, they would have a far better chance of retaining them as clients. And in an era of Big Data, customers who used our app would deliver valuable information about their spending habits and so on, enabling banks to develop more targeted financial products, hone their cross-selling and improve their credit-scoring techniques.

Featured on the Temenos MarketPlace, one of the largest fintech forums of its kind, the Limitless solution is ready to plug and play, so banks don't have to develop and build their own solution.

All in all, Limitless makes long-term saving easy, for the saver and for the bank. Isn't that what we've all been waiting for?

Sara Koslinska is co-founder and chief executive of Limitless

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