An estimated 65 million stimulus payments will be made to households over the coming weeks as part of the US federal government CARES Act. But a good portion of those will arrive much later than expected, potentially even too late for some families in dire straits today.
For others, these checks will be better suited for acute emergencies rather than meeting ends meet for a prolonged period of time.
To help people manage the likely trade-offs they’ll be forced to meet, we’ve offered some suggestions for how households in one of three general situations could maximise the impact of their payments.
No emergency savings, no income
Those who have lost jobs or have drastically reduced income without any type of safety net will have to spend funds on immediate needs. The key is prioritisation, determining which bills are flexible, and identifying other areas of support.
- Two-week horizon. Research shows that scarcity can create tunnel vision and make it difficult to judge the pros and cons of different options. People must force themselves to take a wide view prioritisation and list out needs using a two-week horizon. Anything that absolutely must be paid within those two weeks gets the money first – groceries, medicines, gas to make it to work, etc.
- Flexible payments. Leftover funds can be assigned to priority bills outside that two-week horizon. Many states are prohibiting utility shut offs and evictions, potentially providing flexibility. Those bills will be due at some point, but there could be additional programs or extended payment terms available.
- Find support. Support your list of bills both inside and outside the two-week prioritisation with additional funds to try and create slack. Consider all local, state, and national assistance programs including unemployment, utility assistance, or other government programs that have been expanded through the CARES Act. Gig workers and small business owners can also tap newly available SBA loan programs. And be sure to explore philanthropic efforts such as a local United Way.
Partial savings, partial income
These households have a little more financial flexibility. While funds may be needed, they have enough of a cushion or income to offer more choices and options.
- Create rules. When trying to manage a monthly paycheck or government benefits like SNAP, it’s hard to manage spending over a longer period of time. Even with slack in their budgets, people must plan ahead and set up rules to guide their spending week-by-week.
- Start saving. Depositing the stimulus funds into a checking account makes it challenging to maximise funds. Use a savings account to “hide” a portion of the funds not for immediate use. Research has found this partitioning of available resources into multiple accounts can significantly slow spending and increase savings. If you have to open a savings account to do this, make sure it has zero fees. You can look for a local Community Development Financial Institution or consider the handful of digital options with no fees.
Solid savings, fully employed
Some people have remained in good financial standing or do not need the funds as much as others. While it’s possible for them to pay it forward, there are also ways to insulate themselves against future financial shocks.
- Pay it forward. There are multiple ways that individuals who do not need a check can use that money to improve the lives of those around them and the communities they live in. Many charities and non-profits serving those affected by the pandemic rely on donations. People can buy gift cards or increase spending at their local businesses, many of which are struggling to keep their doors open.
- Build an “Emergency Savings” cushion. Even before the COVID-19 pandemic, a majority of households were unprepared for an unexpected expense. One reason people do not save enough is because they underestimate how often unexpected expenses arise. While these individuals may be currently unaffected, having a cushion in case of emergency is an important step to maintaining that financial well-being.
- Plan now. However these households decide to use their stimulus funds, the key is to decide now before payments arrive. Research has consistently shown that people are much better at making decisions for the future rather than for the present. People can go even further by setting up a commitment device – like signing the a public pledge or sharing intentions with a friend – to ensure they follow-through on their intentions.
MAS completes multi-currency blockchain testing
The Monetary Authority of Singapore (MAS) has completed its fifth and final testing phase for a multi-currency blockchain payments network.
Codenamed Project Ubin, the blockchain network is jointly developed with JP Morgan and investment firm Temasek.
MAS announced the fifth phase of the project on 11 November 2019, following the successful development of a blockchain-based prototype for multi-currency payments.
Phase five of the test saw payments successfully settled in different currencies on the same network.
It validated the use of smart contracts on the payments network prototype for settlement, conditional payments and escrow for trade.
MAS believes that the prototype could enable faster and cheaper transactions than “conventional cross-border payments channels”.
The regulator adds that its current system can serve as a test network for collaboration with other central banks for developing “next generation cross-border payments infrastructure”.
To that end MAS has made technical specifications public to “further industry development”.
“As with all innovation adoption, there is a time for experimentation, and a time for commercialisation,” says Sopnendu Mohanty, chief fintech officer at MAS.
“Project Ubin has worked with the financial industry and blockchain community on a journey of experimentation, prototyping and learning.
“Following the successful experimentation over five phases, we look forward to greater adoption and live deployment of blockchain technology.”
AMTD Announces A Flurry of Partnerships and the Name of Its Digibank
AMTD Group announced today several industry partnerships that it has established in efforts to better serve SMEs in Asia.
It has entered into two separate partnerships, one of which is with GlobalLinker that is aimed at helping Asian SMEs in their digitalisation and global expansion while, the other is with Funding Societies and CIMB to explore collaboration opportunities in offering digital finance solutions to SMEs in Singapore and South East Asia.
The partnership with GlobalLinker will see ATMD becoming the preferred financial services partner on the former’s SME focused platform. In their statement, AMTD said that it will deploy the entirety of the ecosystem to serve SMEs on the platform which includes its Hong Kong-based virtual bank Airstar and also its potential digital wholesale bank consortium in Singapore.
The AMTD-led consortium includes Funding Societies, SP Group, and Xiaomi that is subject to approval from the Monetary Authority of Singapore. They revealed that their Singapore-based digibank will be named Singa Bank.
Meanwhile, the partnership between ATMD, CIMB and Funding Societies will include areas like payroll, mortgage loans, unsecured loans, remittance, and brokerage. It also aims to utilise CIMB’s wide range of banking and capital market services to complement AMTD’s digital solutions to provide SMEs with a one-stop, cross-regional, cross-product financial solution.
These partnerships seem to provide hints as to the shape that AMTD’s digital bank in Singapore will have a particular focus towards serving the SME segment.
US buy now, pay later fintech Sezzle in $60m raise on ASX
Sezzle, a US-founded buy now, pay later fintech, is raising AUD 86.3 million ($60 million).
The total comprises of an institutional placement which raised AUD 79.1 million.
Under this placement, 14.1 million CHESS Depositary Interests (CDI) were issued, representing 8.4% of Sezzle’s existing capital.
CDIs allow non-Australian companies like Sezzle to list on the Australian Stock Exchange (ASX).
The other AUD 7.2 million is a non-underwritten share purchase plan which is now in the process of completion.
Sezzle’s move to Australia
The start-up launched its lending platform in 2017 in the US. It then expanded its offering to Canada.
In July 2019, the US fintech launched an oversubscribed initial public offering (IPO) on the Australian Securities Exchange (ASX).
Australia already has a handful of buy now, pay later competitors which are surging in growth.
This month alone, Afterpay launched a AUD 1 billion capital raising and founder sell-down, Brisbane-based Fu opened its Series A funding round, and Laybuy launched its second pre-IPO raising.
“We appreciate the continued support of our existing institutional investors, particularly those that have remained as CDI holders and supporters since our ASX IPO, around one year ago,” says Sezzle’s CEO, Charlie Youakim.
The new capital will help strengthen Sezzle’s balance sheet, as well as fuel international growth, customer numbers, marketing and new products.
Share prices rocket
Following the publication of its second quarter update, Sezzle’s share price rocketed to a record high last week. It hit AUD 8.25 before reaching a trading halt.
During the quarter, the fintech’s underlying merchant sales totalled to $188 million. This represented a 58% quarter-on-quarter increase, and a 349% year-on-year increase.
The strong quarter results were down to increased activity amongst both consumers and merchants, as well as to repeat usage.
“Our strong [first half] performance, improving consumer profile, and confidence in reaching an annualised run rate for UMS [underwriting management system] of $1 billion by the end of 2020 allows us to be uniquely positioned to further expand through a number of near-term growth initiatives,” says Youakim.
“Importantly, this capital raising will give us the ability to invest in these initiatives as well as fortify our balance sheet.”
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