Chip is eyeing the wealth management space with a new product

  • PFM fintech Chip is adding an investment product next year.
  • This complements its existing products and might help it lure in new users as the trend of rebundling finance continues.
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The UK-based personal finance management (PFM) platform is planning to move into wealth management, per AltFi. Chip currently lets users connect all their bank accounts, automates savings into savings accounts, and enables customers to set financial goals. It now plans to add access to funds and exchange traded funds (ETFs)—but not direct equities—as part of its premium account offering.

The new service will complement Chip's existing product suite, while also enabling the startup to benefit from the recent surge in interest in wealth management products.

  • The new product adds to the fintech's existing products, especially at a time when interest rates are dropping, making such accounts less valuable to consumers. Chip announced the rollout of its 0.9% annual equivalent rate (AER) easy access savings product in July, which is covered by FSCS insurance, meaning deposits of up to £85,000 ($108,489) will be protected. It should be noted that the product has a cap of £5,000 ($6,382), and the returns will change to 0.3% AER from November 29, 2020. Chip CEO Simon Rabin has pointed out that cash has turned into a "dead asset" due to current interest rates. As such, the new product may help users get a higher return on their money, but the risk of investing is also higher than depositing funds into a savings account.
  • Chip has been on a strong growth trajectory in 2020—and it can build on that with the new product. As of August, Chip's user base had jumped 55% since the start of the year. Interest in digital wealth management platforms has also surged throughout the pandemic. The new service will add value to its premium account offering, potentially luring in more paying customers who are looking for digital investment options alongside PFM tools to manage finances.

This is yet another example of rebundling finance, and to further enhance the offering and compete with digital wealth managers, Chip should expand its ETF service. A number of other players are adding services outside of their initial line of business, including fintech SoFi, which moved into investment management last year, and neobank Revolut, which launched a commission-free investing platform in 2019 as well.

To be competitive in the wealth management space, Chip needs to ensure that it offers a sufficiently diversified set of ETFs, such as sustainability-focused ones. Consumers are also uneasy about investing amid the current economic situation, and while it's currently unclear what the investment product will look like, Chip would be wise to add a customer support option in the form of licensed financial advisors to the product.

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