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The Deep Vault of Millennial Fintech Apps

Savings, investment, and credit card debt services are increasingly marketing to younger users. But they might be useless—or even predatory.

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“Namaste Molly, your checking balance today is [redacted]. Yesterday it was [redacted]. Text ‘why’ to find out why it changed $10.75.” Most days, I get a friendly text just like this one—except sometimes it starts with “Aloha,” or “Good day.” Sometimes an emoji is included. These texts come from Digit, an app (offering a 30-day free trial; $2.99 per month thereafter) that squirrels away money from users into accounts they can cash out whenever. I have Digit funds like “emergency pet $$$,” “travel,” “rainy day,” “race fundraising,” and “dranks,” which the app encouraged me to use emoji for in the descriptions I wrote upon setup. When I feel like dipping into these cash reserves—the digital equivalent of hiding money in car consoles or under mattresses—I hit “withdraw” and wait for the funds to hit my bank account.

I downloaded Digit as part of my New Year’s resolution to save more money and cut back spending on non-necessities. When I went to look for digital helpers toward this pursuit, I found no shortage of adorable, gamified apps at my disposal.

The fintech (“financial technology”) market is particularly poised to meet the needs, or at least the wants, of millennials. Those of us who came of age in the era of Facebook and Myspace, and later became real adults with the assistance of smartphones and apps, naturally turn to similar technologies for financial management. These apps are coated in millennial pink and opt for popular “startup” fonts. Their Instagram advertisements are trendy, in the vein of meal-delivery or beauty-in-a-box subscriptions.

There is good reason for this growing class of millennial-friendly fintech apps, which includes Digit, Qoins, Peak, Albert, Acorns, and Robinhood, among many others. The economic struggles lobbed at this generation are well-documented. Fewer of us will become homeowners or parents; many work freelance jobs that don’t provide health insurance. 401Ks and alternative retirement savings are few and far between. And then there’s seemingly impenetrable student loan and credit card debt.

“Millennials came out into one of the worst financial crises in U.S. history, right?” says Erin Lowry, the founder of Broke Millennial, a finance blog turned book series. Wage stagnation and an insecure job market are only two of the biggest challenges this generation is dealing with, Lowry says. While there are a bevy of systemic factors contributing to millennials’ struggles with money, cultural conditions are also at play. “There’s still such discomfort with even talking about [money] in the first place,” she says. “And when we can’t talk about it, it just perpetuates the issue in a lot of ways and it creates a sense of isolation. You feel like you’re the only one with this problem or you feel like you’re going to be perceived as stupid or ignorant for asking questions when a lot of other people are probably feeling the exact same way that you are.”

Where do many younger users turn when they have a problem they’re embarrassed to talk to a real-life expert, or even just a friend, about? More often than not, the internet. In some cases, they find experts like Lowry, who often have personal experience to draw on. But even seeking someone out online can be intimidating. Often, people instead head to the App Store. Meeting users where they are makes sense. The finance industry can’t expect this generation to log off and head into brick-and-mortar offices. “There is certainly the potential to help solve pain points by doing it in an app, because we are pretty much addicted to our phones, and a lot of us are even banking primarily on our phones instead of a computer at this point,” Lowry says. “But in terms of the explosion [of these apps] ... people are seeing it as an opportunity to build a company and potentially make money.” That doesn’t mean every personal finance app is nefarious, Lowry says, but the difference can be difficult to parse.

I decided to try Albert and, as I did with Digit, set up a few pockets for saving here and there. Then Albert asked whether I wanted AI-spawned financial advice; I could try the feature for 30 days free, then the price would jump to $1.99 a month. After accepting, I realized that getting out of the rolling subscription would be a pain. The irony of forgetting about a free trial and then losing a few bucks a month to an app that purports to save money is not lost on me. Lowry cautions that users must pay attention to their return on investment with these apps; sure, $1.99 isn’t a lot, but if the subscription helps someone save only $10 a month (which becomes $8), that isn’t all that helpful over a year. If someone wants to rely on this passive approach to saving, they have to level up when using some of these apps, like Acorns, that round up purchases or take bits of money here and there to invest. “My rule is if you’re using them, try to put in at least $50 a month to really be getting some true value out of the fee that you’re going to be paying,” Lowry says. The pitch behind many of these apps is that saving can be so easy that you don’t even notice the money is gone—but anything that purports to significantly improve someone’s financial life should be noticeable.

Erik Christman, a managing partner at Oxford Financial Partners, agrees with Lowry that many of these savings apps fail to considerably change users’ balances. “I hope folks aren’t being fooled into thinking that they’re really getting someplace,” he says. At best, these apps create pockets of spare change, but at worst, they reinforce technology habits that won’t benefit consumers’ bank accounts. Dependence on subscription services that quietly take a few dollars every month and in-app purchases that add up are harmful when it comes to smartphone games, but outright dangerous when it comes to finances. This setup doesn’t help people evolve their approach to handling money, which might be what most consumers need. “Technology is here to make our lives better, right? Maybe, possibly, if we use it properly,” says Christman. “I don’t care what space you’re looking at, whether it’s time management or financial management. There is an amazing array of apps and websites that are all saying, ‘We can help make this better for you.’ But they must not be getting the results.” People are returning to tried-and-true methods of getting their lives in order. For proof, look no further than the bullet journal trend or KonMari, which require hands-on time and thought, meaning people can’t offload them to an app.

Following that logic, You Need a Budget is an exhaustive online spreadsheet to help users manage their finances. There is nothing quick, easy, or mindless about YNAB; it requires its users to take stock of what’s going on with their money. Christman finds more mindful methods of money management are more effective. One piece of advice he gives clients is “write it down.” It’s not as easy as a download or as seamless as linking a bank account … but it could lead to real, positive change.

While passive saving apps are one of the most well-known and popular categories of fintech, there is also the fast-growing group of easy investing apps like Acorns, Stash, and Robinhood. Lowry, whose next Broke Millennial book is about investing, says that while users of these apps need to take a hard look at which portfolios these services have them investing in, they can be a good starting place.

Robinhood has been described as “recreational gambling,” and for good reason: It gives investing an appified, gamified makeover to the point that it’s easy to forget that in this app, you’re using real money—your money. The company also came under fire recently for claiming it insures users’ checking and savings accounts—it does not.

Another growing, and perhaps riskier, vertical is payday loan and debt consolidation apps. Hulu subscribers are likely familiar with Earnin, a payday advance app that advertises heavily on the streaming platform. The sleek, modern service somehow seems different than the mini-mall storefronts offering pay advances, when in reality it’s just easier to use. “If you have something that you can just easily tap on your phone [for money] once a month, multiple times a month, and you’re starting to rely on that, it could definitely turn into a problem,” Lowry says. “I also don’t want to judge people who find themselves in situations in which that might quite literally be their only option.”

Some fintech companies targeting this market have failed customers. In 2016, LendUp—an online credit improvement and short-term loan service—was ordered by the Consumer Financial Protection Bureau to pay $3.6 million in refunds and penalties to more than 50,000 customers. “LendUp pitched itself as a consumer-friendly, tech-savvy alternative to traditional payday loans, but it did not pay enough attention to the consumer financial laws,” then-CFPB director Richard Cordray said in a written statement. “The CFPB supports innovation in the fintech space, but startups are just like established companies in that they must treat consumers fairly and comply with the law.” Among other things, LendUp didn’t report customers’ credit information properly, meaning they wouldn’t be able to get the better credit scores they were promised. The company’s guarantees about low-interest loans also didn’t apply to all of its customers because of state regulations. LendingClub, a loan and investing service available online and via an app, also received a regulatory slap on the wrist in 2016 when it was revealed that its founder and then-CEO did not disclose $22 million in loans sold under false credentials.

Some fintech apps and services find themselves dogged by their competitors’ missteps. In 2016, The New York Times profiled Tally, a low-interest loan service (available via app and website) to pay off credit cards. Tally is for consumers who already have high credit scores and doesn’t charge origination, prepayment, or annual fees. There’s no fee if users want to add to their monthly payment to pay the loan off faster. Payoff—which advertises on Instagram and has a millennial-chic app—works similarly, though it’s focused just on lending money to users with a credit score of 640 or better to pay off their credit card debt. These companies basically make money the same way credit cards do, and they might be a worthwhile option for some more financially privileged people. While that can be a helpful tactic, it’s not exactly a useful resource for someone trying to get out of serious debt or improve credit scores—and those are arguably the people who need help the most.

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Because of how some lending technology companies have acted, there is—rightfully—added scrutiny across the fintech industry. “The more scrutiny there is, the more legitimacy there will be in the long term,” Tally founder Jason Brown told The New York Times. Christman remains skeptical. “Now [payday loan or credit card debt loan apps] kind of make my stomach turn,” he says. “It wasn’t that long ago that you saw late-night infomercials saying ‘free credit counseling.’” The industry keeps dragging itself through the mud, but that doesn’t mean he can’t see the possible upside of fintech. “There’s the Holy Grail out there,” he says. “A great personal finance app that is effortless in terms of setup, and smart in its ability to see what your spending patterns are and predict when you’re going to be running short on cash. Someone is going to figure it out.” And when they do, Christman says his finance firm will happily pay to use it.

An earlier version of this piece included a quote from Erin Lowry that was taken out of context. It also suggested that the Digit app is free; it has a free trial.