Day-to-day budgeting is no longer something that most of us do in our heads, or indeed with pencil, paper, calculator and spreadsheet. Increasingly Britons are keeping their finances under control with the assistance of a new generation of mobile apps. It’s a trend that is likely to accelerate as consumers become more aware of the possibilities of Open Banking.
At least that’s the finding of new research by money management app provider Yolt. According to the study almost three-quarters of consumers (70%) reach for their smartphones when the time comes to tot up their spending, work out a budget for the month, or simply pay a bill. In 2016, similar research found that only 40% of us had embraced the app habit.
The sharp rise in the number of people downloading money management apps suggests that the appeal of this particular subspecies of financial tool has extended beyond early adopters and is gaining acceptance in the population at large.
Millennials Lead the Charge
Inevitably, perhaps, millennials – those born in the 80s and 90s – are leading the way. Among the generation whose coming of age coincided with the era of the smartphone, 89% are active users of money management apps. Perhaps more surprising, in the 55 plus age group, almost half have embraced mobile-enabled financial tools of some sort.
“The UK is switched on to the benefits of money apps, from managing their finances, making payments, comparing products and much more. Nearly three-quarters of Brits are now using some kind of app to manage their money,” commented Yolt Chief Operating Officer Leon Muis.
A Direction of Travel
As a provider of financial tools, Yolt could perhaps be accused of accentuating the positive, but other surveys also indicate that the appetite for money management tools is on the rise.
For instance, in research published in February, digital banking software provider Crealogix found that 45% of under 35s would consider using a budgeting app and 91% favour digital banking to visiting branches or carrying out transactions by telephone. And while the Crealogix survey found much less enthusiasm for all things digital among older age groups, the direction of travel seems clear. Consumers are, in greater numbers, seeking ways to not only do their banking online but also to manage their finances.
“There are complex and widespread changes taking places in the financial services sector, driven by the wider digital transformation in our society,”
said Jo Howes, Commercial Director at Crealogix.
The Open Banking Effect
But standalone budgeting tools won’t on their own, necessarily deliver what consumers are looking for from the next generation of financial apps. Crealoogix also found that significant numbers of consumers (35%) want to see an overview of their finances – something that will require money management apps to access a broad range of bank account and transactional information.
In the UK, this free flow of data should be enabled by the new Open Banking regulations that came into force in January, requiring Britain’s ten largest banks and building societies to provide account data to licensed fintech companies via a secure software platform. This is seen by many providers as a crucial next step in bringing money management tools into the mainstream.
“The Open Banking initiative has potential to provide a more personalised service and the ability to cover an individual’s every need in a single secure app,” said Howes.
It’s a view shared by Yolt.
“We see Open Banking transforming the way that consumers interact with the retail financial services sector,” said Muis. “However, we still have a long way to go in educating consumers on the latest benefits available to them through Open Banking.”
Not on the Radar Screen
That’s partly because Open Banking – which only launched in the UK in January of this year, – has barely had time to register on the radar screens of financial services customers.
According to the Yolt survey, only 22% of consumers are aware of Open Banking and the vast majority are uncertain as to how it will help them manage their money more effectively. That’s not to say that Open Banking has had no impact whatsoever. 20% of respondents said that thanks to new regulations they now had visibility of several accounts through a single app.
And that’s important because of the nature of the financial service market. Today, a typical consumer might run a current account with Barclays or Lloyds, while saving for an ISA with a specialist provider. The same consumer might also have one or more credit cards that aren’t directly linked to the main bank provider. And increasingly, a High Street Bank customer might be ‘experimenting’ with a secondary current account managed by a mobile-first challenger such as Monzo or Starling. This complexity makes it difficult to manage money – even with a digital tool – unless all of the relevant account data is available.
Open Banking enables app companies to gain access to account information from a range of providers, including the big banks. That means they are in a much better position to provide enhanced services based on up-to-the-minute transactional data.
Simon Rabin, the CEO, of artificial intelligence powered savings app, Chip, says this removal of data walled gardens will put consumers in charge of their own financial decision making.
“For years, banks have acted like they own their customers’ financial information. That has never been the case – it’s our information and we should be able to use it to our own advantage – whether that’s to make smarter saving decisions, to analyse our spending patterns, or to see if we’re using the best products for our own financial circumstances,” he says.
Bringing it All Together
For its part, Yolt has used the Open Banking infrastructure to integrate its services with digital banks Monzo and Starling Bank and High Street giants Lloyds and RBS. In effect this means that account holders with both banks can now track their spending via the Yolt app, creating a much more holistic service.
Backed by Dutch banking giant ING, Yolt is by no means the only game in town when it comes to money management via smartphone using Open Banking links. Other players in the market include the aforementioned, Chip, Moneyhub (which allows users to track current accounts, credit cards, savings and investments) and Money Dashboard (current accounts, cards, savings). In addition, High Street behemoth, HSBC has been testing Beta, an app that will provide visibility over accounts from more than 20 providers.
If Yolt’s survey is an accurate representation of consumer behaviour, then money management apps are coming of age. Perhaps that reflects a financial services environment characterised not only by multiple current and savings accounts but also a greater emphasis on managing money more effectively in the face of pressures such as student loan repayments, high levels of consumer debt and a protracted squeeze on wages. The big question is, will we pay any attention to what the apps are telling us.