US fintech giant Acorns has launched in Australia and hopes to have 100,000 users by the end of the year.
Acorns Australia lets iPhone and Android smartphone users direct spare change from daily transactions to five diversified investment portfolios.
It costs users $15 a year for balances under $5000 or a percentage fee for anything above that.
The micro-investing app is renowned for having actor Ashton Kutcher as one of its early investors.
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Acorns Australia managing director George Lucas and Acorns global director Colton Dillon told StartupSmart they want the app to educate and empower young people with saving and investing.
When Acorns co-founder Walter Cruttenden spoke with StartupSmart last year, they reported more than 700,000 US users.
Now Dillon claims more than 2 million downloads.
Lucas says in some ways Australia’s online banking is ahead of the US so Acorns may gain faster traction here.
“We hope to have 100,000 users by the end of the year,” he says.
However, with 20,000 people already signed up and using the app, Lucas says it’s likely they’ll exceed this goal by December.
“Believe it or not Australians actually have a culture of saving,” he says.
Lucas has acted as an Australian partner for Acorns and says this has been instrumental in setting up local operations, financial services and licensing.
One of the key reasons Acorns took a partnership approach in breaking into Australia was to ensure they would be up to speed with its legislative and regulatory environment, Dillon says.
Dillon was Acorns’ fifth employee and has been with them through their first rounds of major fundraising.
During the research phase, Lucas says they held focus groups in Australia asking the same questions that were asked in US focus groups to identify key differences.
“Pretty much the mainstream was exactly the same,” he says.
This gave them confidence that Acorns would work in Australia.
Lucas says day-to-day use of technology can vary dramatically from market to market so ensuring your fintech product solves a problem that exists in the local context is critical.
“It doesn’t guarantee that just because you’ve got a great fintech product here in Australia that it’s going to work anywhere,” he says.
He highlights the example of transferring money between friends in Australia, which is commonly done through a simple exchange of BSB and account numbers.
“In the US it costs $10 to do that so people are coming up with apps to solve that problem,” he says.
One the challenges of breaking into Australia as a US company is there is not as much choice in service providers, Dillon says.
“A lot of the publically available APIs for hire are more developed in the US than they are in Australia currently,” he says.
“In California, we have so many providers who are jumping into the fintech space.”
This is driving the innovation of many financial services like cash advances and savings.
Lucas also notes that access to venture capital is much lower in Australia.
On the other hand, however, Lucas says regulators are much more “friendly” in Australia.
He says it took Acorns just under a year to get registration in the US while in Australia they were registered within five months.
Dillon says where they take Acorns next will depend on where they find the best partners and local demand.
They’ve had interest from UK, Canada, Asia and South America.
“The most important part is to find that really engaging partner who is ready to go after it like our partners here in Australia have,” he says.