In the build-up to the British Bank Awards, we’ve asked some of the most innovative voices in the industry to share their thoughts on the future of finance. This article is by Steve Tigar, CEO of Money Dashboard, which won “Best Personal Finance App” at the 2018 British Bank Awards.
Aided by advances in technology, legislation and accelerating consumer adoption, the number of apps helping people with every facet of their financial life has boomed in the last few years. But giving consumers access to their finances at their fingertips is not entirely new.
When Money Dashboard was first founded, consumer trust in banks was at an all-time low as a result of the financial crash. This created a population of consumers who had a need for new, innovative tools that could help them make the most of their financial situation from providers they could trust.
A decade has now passed and a recent study has highlighted that around 70% of UK workers consider themselves “chronically broke”. The need for tools that can help people be better with money – whether that means spending less, budgeting more effectively or repaying debt – is as great as ever, and consumers are benefitting from a wide choice of providers that offer help with everything from choosing the best bank provider to making small contributions to their savings.
Our approach was to build a personal financial management tool that not only helped people to manage their finances but also to progress with them. Money Dashboard allows consumers to aggregate all of their spending and income from their current, savings and credit card accounts into one place so that they can gain a clear picture of where their money is going and what actions they must take to improve their financial situation.
Research by Money Advice Service estimates around 21 million UK adults have less than £500 in savings and that a further 4 in 10 feel unable to control their finances, yet so many of us turn a blind eye and hope the problem goes away. However, taking positive action and using an app like Money Dashboard really can help people improve their financial wellbeing.
In collaboration with researchers at Harvard Business School and Edinburgh University, we investigated people’s motivations to set budgets and uncovered some fascinating, but not wholly surprising, results. Our research really highlighted that most people don’t actually want to budget, nor do they want to save money for the sake of it.
They want to achieve something, be that getting on the housing ladder (28%), paying off debt (19%), or taking the family on holiday (9%). They intuitively understood that being more disciplined with their spending would help them achieve the goals that matter to them, but they felt they needed support in doing so.
“I was getting into tracking my money. I had this missing money at the end of the month and I was not sure where it had gone.”
“Control is about having a better understanding of how much I am spending, and what I am spending it on.”
The good news uncovered by the researchers is that apps like Money Dashboard really do work to improve people’s financial situations. They found that new Money Dashboard users typically saved 14% of their discretionary spend in the first month. What’s more, engagement with the app correlates to budget compliance (aka. decreasing overspend) and each login can roughly be equated to £10 saving for an individual. The bottom line? Visibility and control (two core things budgeting apps like Money Dashboard can give you) are undervalued as a key drivers to affect behaviour change.
As ever-more apps are developed to help people with their finances, the key to their success will be their ability to deliver valuable insights back to consumers by enriching the financial data they work with, and in doing so help people to make the right decisions for their financial wellbeing.
One way Money Dashboard are hoping to ensure this happens is through our recent partnership with GoCompare. The ‘Machine Learning for Fintechs’ initiative allows us to support other FinTech innovators by letting them pass anonymised transactional data through our machine learning system. This in turn analyses the data to help them better serve their customers in an intelligent way. For example, mortgage providers may look to provide more accurate affordability assessments for clients based on real-time spending data. The full range of practical applications for consumers is wide-ranging, deeply impactful and of course, not yet fully explored.
Looking a few years down the line, the true catalyst in personal finance innovation will be the intersection of service innovation (both from new entrants and incumbents) coupled with maturity of Open Banking, a government-led initiative to improve the ways we as consumers are able to control the data we share with regulated apps and therefore our understanding of and interaction with our financial products and the banks themselves.
Not only that, but collaboration across the industry will also accelerate and the companies at the forefront will look to tie-up in ways that help them deliver bespoke solutions to their overlapping customer bases. Examples of this are already prominent, such as with our own integration with challenger banks Starling and Monzo.
As consumers, our ability to gain a clearer view of our finances, make quick, informed choices about the best products for our situation and shop around will continue to improve to truly put us in charge. As Bill Gates famously said, “banking is necessary, banks are not”.