Financial Apps Up in Pandemic

A Santa Monica-based personal finance platform named Reel, which discourages the use of credit cards, gained traction during the pandemic.
It is not alone. In the last couple of years, a number of nonbank financial platforms popped up or ballooned in popularity as at-home consumers took to managing their money and investing with apps. So much so that one local expert believes there are “too many to keep track of” and some others are concerned about consumer protection.

In Reel’s case, the platform was co-founded by Daniela Corrente and Alejandro Quilici, both of whom realized from personal experience that consumers are addicted to credit cards, and they wanted to find a way to discourage their use.
“When it comes to money, there are so many emotions attached to it,” Corrente said.

“Humans are always going to want things and finding ways in which they can achieve their aspirations without having to always fall in debt is something that’s very core to our value proposition as a company.”
The pandemic period helped many financially but plunged millions of others into debt. According to an Experian study, consumer debt balances increased by 5.4% in the third quarter of 2021 to $15.3 trillion — a $772 billion increase from 2020.

Reel assists consumers to save up for purchases they want instead of relying on credit. The Reel website links to a consumer’s bank account and helps the user establish a savings plan by automatically deducting a specified amount daily or weekly. Once the savings goal is reached, Reel places the order on the consumer’s behalf.
Users can use the app to squirrel away money for anything from apparel and furniture to electronics, but Reel also aggregates product listings from retailers – which is how Reel makes money.

“We give people really simple plans toward purchases so they can buy what they want with their own money,” Corrente explained.
Suppose a consumer wants to purchase a stroller. Reel displays strollers from thousands of merchants at different price points for the consumer to choose from. Upon selection, the platform will help the consumer save by taking the money out of the user’s bank account.

“It’s absolutely free for the customers,” Corrente said. “On the contrary, they’re getting rewarded. They get 1% back on every dollar that they save. That’s way better than any savings account because it’s not annualized, it’s actually on the dollar.”
Reel makes its revenue on the back end.
“We monetize from the interchange of the money and from retailers who essentially pay us,” Corrente said.

Outperformed banks

Those kinds of features on consumer financial platforms caught the favor of Americans particularly in the past couple of years. Financial management, investing and day-trading apps spiked 15 percent early in the pandemic and kept going.
Mobile analytics firm App Annie reported a year ago that mobile fintech apps outperformed traditional bank apps by 10.8 times. Investment and trading platforms such as Robinhood were among the top downloaded finance apps.
But that means a crowded field for companies such as Reel.

Corrente and Quilici.

“The problem that I have with all of it is that it’s not under one cohesive banner,” said Joshua Lastine, a Beverly Hills entertainment lawyer and fintech expert.
“If someone like an Amazon or Venmo with a lot of brand recognition put it under one banner, I think it would be more successful. Right now, there are too many to keep track of.”

Lastine feels that companies such as Reel must do something to stand out from the pack.
“They need like Elon Musk to tweet about them or Joe Rogan to talk about them,” Lastine said.
Some others are concerned about whether consumers are fully aware of the risks inherent in putting their money in an app. Lawrence Harris, finance professor at the USC Marshall School of Business, expresses concerns about Reel’s business model, for example.

“They are trying to act like a bank,” he said. “While I’m intrigued by the service, I would never use it until I knew where the money is held and what system of overseers will ensure that they won’t lose my money.”
Anyone who uses any financial app has to be very confident that the system is legitimate, according to Harris. Any user needs to be concerned about what happens if the platform loses the money or goes out of business. “Those problems are almost guaranteed without regulation.”

For her part, Corrente responded that users of Reel have nothing to worry about.
“We work with multiple banking partners and the money is FDIC insured,” Corrente said.
Still, the apps are popular because of need. The Experian study found that the average US consumer has an annual income of $62,866 and carries a credit card debt of $5,878.

“In addition to the ever-present influences on both debt and income, the pandemic highlighted the different financial realities for people across the country,” the study states. “While many lost their jobs or suffered financial hardships, others found their situations improved.”
Corrente said that during the pandemic, Reel saw an increase of consumers saving for home items and technology.

“As the world opened more, we have seen an influx of savings for fashion, for travel, for things that are a little bit more outdoorsy,” she said.
What brought the founders to Los Angeles, where they started Reel four years ago, was the venture capital available. Backers of Reel include Mucker Capital, L’Attitude Ventures and Uncork Capital.

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