An alternative to time deposits to make savings more profitable

Crowdfactoring offers retail investors a higher return on their savings than the interest provided by time deposits

Time deposits have traditionally been one of small savers' most popular investment products. Firstly, it is a simple mechanism in which an investor deposits a certain amount of money for a set period in exchange for obtaining a return at the end of that period. Secondly, term deposits offer fixed interest rates, and the investor does not have to take any action once the product is contracted.

However, in recent years, various alternative investment methods have emerged that democratize the access of small savers to the investment arena by completely changing the approach from passivity to proactivity.

Alternative investment platforms, through mechanisms such as crowdlending or crowdfactoring, offer small savers the possibility of investing small amounts in products that are easy to understand without having to leave home, being able to make decisions autonomously and obtaining higher returns than those offered by banks through fixed-term deposits.

Next, we will analyze why investing in company bills can be a tremendous value-added alternative to time deposits.

The profitability of time deposits in Spain is below the European average

According to the latest data from the European Central Bank (ECB), the yield offered by Spanish banks to households for term deposits of up to one year was 2.22% in June, up substantially from 1.64% in May. However, this figure showed that interest in time deposits in Spain was five-tenths of a percentage point below the average for the eurozone.

The difference between the yield on time deposits in Spain and the three leading EU economies was even more significant. In June, German banks offered savers an average interest rate of 2.78%, Italian banks 3.35% and French banks 3.46%.

In this scenario, small investors have been attracted by other short-term and fixed-yield products, such as Treasury bills, which in August offered a yield of over 3% and registered a demand that doubled the supply of public debt, or crowdfactoring, thanks to yields close to 8% on average, as in the case of the Inversa Invoice Market platform in 2022.

Why wait for term deposit interest rates to rise if you can maximize your savings now?

The ECB expects interest rates on time deposits to increase shortly, but this will likely not happen until next year. Why?

The ECB's interest rate hike to contain inflation in the eurozone has reduced household demand for credit, so banks have lower liquidity needs. This means they do not have to offer higher yields on time deposits and can prioritize other types of products, such as private equity funds.

Given this scenario, should savers wait for financial institutions to increase the yield on time deposits? Or, on the contrary, should they take a proactive stance and design investment strategies that prioritize more profitable products?

Designing proactive, data-driven investment strategies

Inversa Invoice Market provides retail investors with a crowdfactoring platform designed to facilitate usability and navigability for users.

Companies in the real economy that need liquidity and have an alternative financing channel to traditional products offer their issued but uncollected invoices to the investment community. Each person can access an invoice's essential data and decide whether to invest their money in it. What information are we talking about?

• Assignor company and debtor business
• The total amount of the invoice
• Interest
• Credit rating of the debtor company
• Credit opinion
• Invoice due date

In addition, Inversa performs, thanks to Big Data and Machine Learning tools, a repayment analysis of the assignor and debtor companies to study their behavior on the platform and assess whether they meet their obligations in due time and form or if there are delays.

In addition, investors can be proactive in their search for information and track all the data of the businesses involved in a transaction on the Internet to complete their overview.

Savers can then design their investment strategies, decide which bills fit their objectives, and actively manage them, reinvesting the interest earned in new bills.

Boosting investments thanks to short payback periods

Inversa also contributes to making savers' investment strategies more dynamic and diversified.

On the one hand, investments in the Inversa marketplace have concise terms. The maximum maturity of an invoice is six months, usually at most three months. Thus, the money is not held back for a year, as with term deposits of one year or more, but is quickly recovered and can be used for new investments.

On the other hand, since Inversa can be invested from as little as 20 euros, savers can diversify their money in multiple invoices from different companies and have to pay different businesses. In this way, not all the money is allocated to a single investment with a specific interest rate, but invoices with varying levels of risk and returns can be combined.

All this without leaving home. Savers only need a computer or smartphone with internet access and have 20 euros to register with Inversa and start investing.

Obtain higher interest rates and decide where to invest the money

Saving is a difficult task that involves enormous effort and relies on the saver's capacity for work. For this reason, people increasingly want to make the most of their savings and maximize them. In an inflationary context, such as the one Europe is currently experiencing. However, inflation has moderated this year compared to last, so investing in savings is essential to prevent their value from devaluing.

Time deposits are still an investment mechanism with high market penetration, but more and more investors want to earn higher interest and actively manage their investments.

Thanks to the emergence of FinTech, retail investors have a wide range of investment vehicles available to acquire products that fit their objectives, characteristics, and needs.

Inversa Invoice Market offers a transparent and attractive product, with an average return 2022 of 7.9%, well above the figures for term deposits.

This transparency refers not only to strictly financial information but also to the fact that investors know which companies they are financing with their money, which contrasts with the opacity of fixed-term deposits, in which the saver decides to invest his money according to the profitability and simply waits until the term of the deposit ends to collect the interest, without taking sides in the destiny of his money.

In short, given the low average yields offered by time deposits, below the average for the eurozone, and with little prospect of them rising significantly in the short term, savers should diversify their strategies and contract other more profitable products.

An investment mechanism such as crowdfactoring offers savers:

• More interest.
• Full autonomy to manage their investments.
• The possibility of diversifying and dynamizing their strategies to maximize their savings.
• Decide which companies they invest in, incorporating other factors such as sustainability or social impact into their investment decisions.