Technology companies have had a profound impact on everyone from booksellers to taxidrivers, while fundamentally changing entrenched sectors like the hotel industry. Now, Yahoo Finance is looking to use elements of the sharing economy for money.
The company is rolling out an app today (Jan. 19) called Tanda, an electronic money pool: Users can join groups of five or nine people to meet short-term savings goals, like putting away money for a vacation or building up an emergency fund. Users pay installments into a pot for a set period of time and can choose when they receive their money. The first two-people to get their money pay a fee, while the last to receive a payout gets a small bonus.
The concept, sometimes called a rotating savings and credit association (ROSCA), has been around for centuries. It works like this: Imagine five people decide to save $50 each over five months, with each person paying in $10 per month. One member of the group gets a $50 payout each month until the cycle is completed.
Tanda is a 21st century version with some of the trappings that have helped make other sharing businesses successful. A user’s trust scoring metric is meant to demonstrate a person’s likelihood of default (Yahoo Finance doesn’t hold capital or reserves if someone doesn’t pay); higher scores allow users to participate in larger money pools. Rather than becoming a bank, Yahoo Finance is providing the Uber-like technology that facilitates the service, according to Simon Khalaf, the company’s head of media business & products. Tanda also has a Venmo-like activity feed and a chat feature.
There could be an opening for tech companies like Yahoo Finance (now part of Oath, a Verizon-owned company) to make inroads in financial services. Younger people are far more willing to trust technology firms with their money than their parents and grandparents, according to a Bain report. Consumers in the UK and US ranked PayPal and Amazon just about as high as banks when it comes to trust with their money.
At the same time, many Americans in particular are drowning in credit card debt, often paying interest rates of 19% or higher. “We are a prosperous country,” Khalaf said. “We have to solve the savings problem.”
Big financial firms are wary of tech companies encroaching on their turf. The president of BlackRock, the world’s biggest asset manager, said last year that he’s worried about tech companies bringing their business model to the financial industry. Amazon routinely runs losses to break into new sectors, and the Facebook business model—collecting and selling consumer data to advertisers—is much different than the traditional banking model of taking deposits and lending money. Such strategies could be disruptive to the economics that big financial firms are built on.
Yahoo Finance’s Khalaf says the company hasn’t gotten that far—it’s planning to make money through fees and to build its community of mobile users. But in the meantime, it’s one more sign that technology companies have their sights on the business of money.