It is not often that I am seriously impressed by a new investment product, particularly when it comes to large insurance companies, yet Liberty gets 10 out of 10 in my books for its latest innovation: Stash.
In a nutshell, Stash is an Android app-based tax-free savings account that creates savings out of spending, has no paper work (it takes all of 49 seconds to start the investment) and no fees.
As a bonus, when you download the app from Google Play Store you receive R50 to kick-start your investment and R10 for every time you refer a friend.
Aimed at young, tech-oriented individuals who know they should start putting money away for the future, but couldn’t be bothered to fill in paperwork, Stash was inspired by the experience of Juan Labuschagne, head of development at Stash.
“When it comes to investing, getting started is the hardest part. I can remember the homework I had to do to make sense of where I was putting my money.
It seemed like too much work and I kept putting it off. Investing should be as easy as tweeting – that’s the goal of Stash,” says Labuschagne.
Rather than setting up a debit order or transferring money into the savings account, it is linked to your bankcard. Every time you spend, an amount rounded off to the nearest R10, R20 or R50 (you can select the amount) is deposited, or stashed, into your tax-free savings account each day – a similar concept to FNB’s Bank Your Change.
For example, if you have set your Stash account to round up to the nearest R10, when you swipe your debit, credit or cheque card to buy a pizza for R56, R4 is also deducted from your bank account.
That R4 is deposited into your tax-free savings account. If you selected to round up to the nearest R20 then R14 is deducted and if you select R50 then R44 is deducted and goes towards savings.
You can also add money to the fund whenever you choose.
The tax-free savings account is invested in a tracker fund comprising South Africa’s 40 largest companies, which should give you a performance in line with the JSE Top 40 index.
Stash also comes with interactive features to encourage users to invest. One example stashes money every day that it’s sunny in your area.
Every morning, Stash checks the weather in your area. If it’s sunny, you stash money.
You can choose to stash R5, R10, R20 or the maximum temperature of that day (in rands).
Before 1pm each day, you can stop Sunny Money from getting stashed on a sunny day. You can also set a monthly limit to the amount that gets stashed.
HOW IT WORKS
You download the Stash app from the Play Store. It is currently only available on Android devices, but will be available in the Apple Store later this year.
You enter your name and cellphone number, which is the only verification needed to open the investment.
Fica documents such as your ID and proof of address are only required when you withdraw from the investment or contribute more than R2 000 per month.
As you do with SnapScan or Uber, you simply link your card to the app, which is managed by the same team behind SnapScan, a subsidiary of Standard Bank.
Each time you spend, the bank’s notification SMS is also sent to Stash, which then calculates how much to deduct from your bank account each day based on your round-up value and number of purchases.
Currently, accounts and cards with any major banks can be linked to the app except for Capitec, which still needs to adapt its technology.
Labuschagne expects this to be resolved in the next few months.
WHY NO FEES?
Remember, nothing is free. Liberty is quite open about the fact that the value for them sits in the data they will collect on aggregate about the spending patterns of South African consumers.
This is the same reason retailers offer reward programmes – information.
Intelligent use of data will refine their risk analyses when it comes to underwriting insurance policies.
For example, research shows that people who regularly top up their airtime have a better risk profile than a person who randomly tops up when their data runs out.
The information remains private at a user level, as the information is anonymised before it is analysed, but the behaviour patterns are utilised to improve information.
Labuschagne is adamant that the data will not be used for lead generation.
“We don’t want to see reviews on the app stores saying that Liberty is using Stash to give leads to their financial advisers,” Labuschagne told journalists at a press briefing.
WHY NO FICA OR FORMS?
The app is able to verify the user using smartphone technology, as your bank will only send an SMS to your phone. Also, you cannot link someone else’s card to your Stash account.
Liberty is using the provisions with Fica that do not require full Fica vetting on investments of less than R25 000 per year.