Micro-investing explored and explainedBy Ryan Noik 26 May 2022 | Categories: interviews
For those looking to save for their future in an affordable way, it can seem like too steep of a learning curve to even get started. But it doesn’t have to be. Ryan Noik speaks to Tony Mallam from Upnup about a new trend in South Africa and how micro investing offers hope to those looking to get their money working for them.
RN: Can you explain what micro-investing is and how it works?
TM: Micro investing is still a fairly new practice in South Africa, but is an excellent way for people to start investing because, as the name suggests, it only involves small amounts of money, but frequently. There are several apps and options available that allow people to easily invest in various asset classes such as stocks, shares and crypto currencies.
RN: What would you say to those who argue that they don’t have enough money to save or micro-invest, especially given the rising cost of living?
TM: The beauty of micro-investing is that you don't need a lot of money to invest-you can literally get started using just your spare change. It's an excellent way to get started in investing, or to carry on investing even when times are tough. It's easier to set a savings mechanism that automatically puts money aside, than consciously decide after you've spent it on something else.
RN: Is there a minimum amount needed to start micro-investing on upnup?
TM: Users of the Upnup app start by creating their profile and securely linking their bank account. Thereafter, each time a user transacts via their linked account, whether it be for food, petrol, airtime or whatever they spend their money on, a small amount of money is saved. There are two options available when doing this. With "addup", a user can choose to add any set amount on the top of every transaction.
So if someone sets this amount at R5 and spends twice in a day, when we run our algorithm on their profile, a total of R10 will be invested. Our other option is "roundup" which means that you round up each transaction to the closest R5, R10 or R50. So if you choose to round up to the closest R10, and you spend R76, the amount will be rounded up to R80 and R4 will be micro-saved and invested. This will be done on a weekly basis, and a minimum of R10 is required.
RN: What options do users have with regards to how their savings are invested? Is there any option you would recommend over another – and why?
TM: At this stage, users have their micro-savings automatically used to purchase Bitcoin as their primary investment asset. One can opt to convert the Bitcoin back into ZAR and withdraw it at any time to the user's linked bank account. In the near future, we will also include other investment options such as fractional shares, ETF's, solar exchanges, and even charities.
RN: How are one’s savings stored and can funds be accessed at any time or is there a wait period – for example, in the event of an emergency?
TM: If a user needs to access their funds, they can convert their Bitcoin to Rand in their wallet on the app and then withdraw those funds to their linked bank account. It can take a few days for payment to reflect in the account- much like with an EFT between two different banks.
RN: South Africa is notorious for not being a saving minded culture. How much of a challenge is it to turn that around?
TM: South Africa does have a very poor savings culture, but a recent study by Kantar has revealed that many South Africans do want to save, but they don't understand or are confused by all the options available to them. Turning this around will depend on a few factors- financial literacy is key so that people can get to grips with the savings options that are available, and make a decision about which is best suited to them.
It's also important to have simple, easy to use savings products that make it easier to save and promote that culture shift away from debt to savings and investing. We know that times are tough at the moment, and the rising cost of living is impacting many households hard, so savings options need to be affordable too. Little steps lead to big changes.
RN: Why do you think that consumers are not interested in traditional banking models anymore? Is because of being fed up with high fees or do you think that traditional banks haven’t responded well enough to how customers have changed?
TM: There has been a lot of criticism of the costs of traditional banking models over the years, and banks have to some extent, tried to respond to this. But there has been a great deal of innovation in South Africa, and across the African continent as a whole in the fintech space, which has created products and services that specifically respond to some of the pain points people face including ease of use, and the high cost of banking, giving people alternatives to traditional banking.
In Africa, populations are young and mobile first, so providing options that allow people to bank, pay, save and invest from their phones has been a game changer in this market. The move to "open banking", whereby 3rd party users can create apps to leverage personal data, will have an exponential impact on personal finance.
RN: How does Upnup distinguish itself – what features or benefits does it offer its users?
TM: Upnup is Africa's first passive micro-investment app- which makes investing really simple and easy. Essentially users just need to "set it and forget it", providing a simple, lower risk way for people who are interested in Bitcoin and crypto currency, to get involved without investing large amounts of money.
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