One of the things that motivated me to start this blog was a desire to share the tools I use to optimize my finances. Over the past several years, I’ve gotten heavily into the fintech world and I haven’t been shy about trying out new fintech apps. Since I was sharing this stuff with my friends, I thought it made sense to try to share it with a larger audience. To date, a good number of you have used my recommendations.
The main issue with these fintech apps, as I’ve recently discovered, is that they’re sometimes too new for their own good. Their business models aren’t proven yet. And as a result, what’s true about an app today, might not be true about it tomorrow.
I’ve been reminded about how fast my recommendations can change with a recent series of events with apps like Digit. Back in 2015, I opened up my Digit account and ended up saving over $6,000 during the two years that I used it. The app was so useful to me that I recommended it to everyone I could. Then, after over a year of using it, they dropped the bombshell – they were going to start charging 3 bucks a month to use the app. Not a huge amount to be sure, but enough for me to stop recommending it – especially since there were free alternatives out there.
It bummed me out that the app that I had been heavily recommending suddenly changed up their business model. I understand they need to make money – and 2 or 3 bucks a month isn’t a lot of money – but I just can’t recommend something that requires you to pay money in order to help optimize your saving. And if I’m not using it, I’m not going to recommend other people to use it.
Ultimately, I feel like it makes me look unreliable if I have to backtrack on a recommendation. Or does it? In today’s post, I figured I’d share some of my thoughts about these fintech apps and whether we can really trust them.
Can We Trust FinTech?
Digit isn’t the first FinTech app that switched up their business models. I was also a fan of Loyal3, a free app that allowed folks to invest small amounts of money into certain individual stocks – as little as $10 even. The nice thing about that app was that it let you invest in partial shares of stock. For folks who just wanted to say they owned a small bit of Amazon or Apple, it was a perfect option.
Unfortunately, Loyal3 ended up closing earlier this year. It’s a real bummer for anyone who wanted a free way to invest in these popular stocks.
Just recently, another fintech app I love, Betterment, changed up their business model by increasing rates from 0.15% to 0.25% for folks with $100,000 or more invested. As I’ve written in the past, I’m a big fan of roboadvisors and think they’re a great way to get someone started with investing.
But for someone with a significant sum of money invested with Betterment, increasing rates suddenly leaves a bad taste in your mouth. Who knows what might happen in the future? And unlike apps like Digit where it’s easy to just close out your account, it’s not quite so easy to close out a brokerage account that suddenly chooses to increase fees.
It’s easy to see why costs change in the fintech world. These are new technologies and new business models. They need to make money – and it’ll take some time before they figure out exactly whether they can make it under their current models.
My guess is, we’ll see other companies pivot in the future as well. I do wonder a bit about what will happen to some of the other free fintech apps out there like Robinhood, WeBull, or M1 Finance. Robinhood and WeBull are apps that allow you to invest in individual stocks and ETFs at no cost. M1 Finance is a free roboadvisor that lets you invest in a diversified portfolio at no cost. Will they really be able to remain free forever? My gut tells me probably not.
So What Can We Do?
With this changing fintech landscape, what’s a tech-savvy personal finance geek to do? The more risk-averse of you might choose not to bother with these apps at all. After all, why spend the time setting up a new app only to have to close it down a few months later.
But on the other hand, I think there’s value in taking advantage of this stuff now while it’s out there. The good thing about fintech is that it’s easy to pivot with it. Signing up for any particular fintech app usually doesn’t take more than a few minutes. If things don’t work out, just close out our account and look for a better alternative. That’s what I’ve been doing.
I don’t recommend Digit anymore, even though I recommended them once before. I could still push it – they offer referral bonuses if I get folks to sign up – but if I’m not using it, I don’t feel right telling others to use it too. And I’m proud of the fact that I don’t just write about apps that offer me an affiliate bonus. The way I see it, if it’s an app I would recommend my friends to use, I’ll recommend it to you too, even if it gives me no monetary benefit.
Ultimately, my fintech recommendations will likely keep changing as business models change and as new stuff pops up on the scene. Don’t be afraid to try new fintech apps out. They might pivot. But you can pivot too.