Booster has gone live with a suite of transaction services including a daily-use debit card framed around a cash fund.
As reported in June, the Booster Savvy Fund launched earlier this year as a portfolio investment entity (PIE) offering a fixed 5 per cent rate and a goal of providing investors with seamless transactional access to their money.
Allan Yeo, Booster founder, said six years since conception and after a rigorous two-year beta-testing period, the Savvy service was now open to the broader public.
Yeo said investors in the fund can use their money almost like a bank transaction account while earning interest at level 50 to 60 basis points below the official cash rate.
Under the Savvy model, fund members can establish multiple sub-accounts, switch on automated money management tools that divert spare cash to designated savings vehicles and use the Booster debit card to spend online or in-shop via the Eftpos system.
“Savvy is unique in that it allows withdrawals from a cash fund using a debit card,” he said.
According to Yeo, the Booster product is underpinned by smart technology and an efficient structuring that links bank transaction-like services to the PIE managed cash fund.
Essentially, Booster provides account and settlement services through an agency agreement with underlying institutions, BNZ, leaving the licensed fund manager responsible for obligations such as anti-money laundering identity checks.
Yeo said the model is similar to fintech transaction services offered in jurisdictions such as the UK except Savvy members garner interest directly from their assets held in the PIE fund.
The fund invests largely in overnight bank bills, providing liquidity and gross returns close to the official cash rate: Booster pockets the difference between the advertised Savvy rate and the OCR up to a maximum of 60 basis points.
“We want to help Kiwis make better use of their money while earning a competitive return on cash and be able to transact,” he said. “At the moment a lot of people are giving their cash to the banks for free.”
The latest Reserve Bank of NZ figures show households have about $40 billion in transaction accounts, which usually bear little to zero interest.
“Our industry is used to building long-term savings products but it hasn’t been very good at helping New Zealanders achieve their short-term savings goals,” Yeo said.
He said with the Savvy product “we’re not trying to be world-conquering but we want to be relevant to our customers”.
The Wellington-headquartered Booster has about $6 billion under management across its KiwiSaver and retail fund fleet, serving 230,000 underlying customers.