Is FinTech making us more financially responsible?
Once upon a time, the only way to find out how much money you had in the bank was to visit your local branch or wait for a most-likely outdated statement to arrive in the post.
These days, most people have access to online banking, mobile apps and other digital resources that help them keep on top of their finances.
The trend began with the humble text message, reminding people of when they are about to exceed their credit limits and affording them the opportunity to avoid over-spending and the subsequent charges.
HSBC claim that since they began using simple SMS overdraft alerts in 2014, customers have saved a combined £100m in fees. Earlier this year, the bank also launched a 'nudge' app to help monitor and change spending habits.
So this raises the question: Is technology making us more financially responsible?
The rise of the apps
In the UK, apps on smartphones and tablets overtook local branches and the internet as the most popular way to bank in 2015.
Consumers now expect their financial experiences to be mobile, personalised, customisable and accessible 24/7. Even non-transactional services like credit checks and seeking financial advice can be carried out online and on-the-go.
PwC estimates that the number of non-cash transactions will grow by 69% from 2013 to 2020, representing over one million transactions happening every minute.
Manoj Kashyap, PwC’s Global FinTech leader, said: “Despite major potential disruptions, the constant growth of the sector will reward those payments players that possess the capacity to understand the changes in customer needs and to deliver prompt and innovative responses to shifting market expectations."
Poor customer interaction and engagement was identified by the Competition and Markets Authority (CMA) as a key issue with traditional banks earlier this year.
Turning statements into savings
The time saved by removing the need for an intermediary or, at least, a face-to-face interaction may therefore have the effect of encouraging more frequent engagement with personal finances on a daily basis.
However, the onus of responsibility still largely rests on the user.
Sarah Walker, Director at KPMG, said: “Technology can help make consumers more financially resilient through better use of data. Banks have a lot of data on people’s spending and lifestyle habits, if they use this smarter, they could provide automated and timely financial prompts.
"Let’s say I’m coming up to pay day so my balance is low and I’m searching on my smartphone for a restaurant, my bank could utilise this data and send me an automated reminder of my balance, or even a tailored marketing option such as restaurant discounts.
“We need to use technology to make financial management a more integrated part of day-to-day life.”
This kind of spending management is also being trumpeted by the digital challenger banks looking for a slice of the mainstream banking business.
A new breed of bank?
Monzo, formerly known as Mondo, is one of several app-only startup banks to emerge in recent years. It offers customers cards that are pre-paid through an app, rather than traditional debit cards, and the 'neobank' company was recently granted a restricted banking licence to hold customer money and issue proper accounts.
Monzo monitors spending and provides notifications, a practice all banks will soon be required to adopt for customers who go into an unexpected overdraft, as part of the reforms suggested by the CMA.
But an upcoming feature of Monzo will also offer customers the ability to set spending and saving targets.
Sarah at KPMG commented: “Technology has the potential to revolutionise the way people handle money, but just providing instant access to a bank statement won’t make people more likely to look at it.
"No one wants money for the sake of having money. They want a holiday, a car or a home, and therefore to save."
Given the commonality of apps that set targets for fitness, diet and productivity, aids to financial responsibility such as these are most likely going to dominate the future of mobile banking and the sector as a whole.
As Bill Gates famously said way back in 1994: “Banking is essential, banks are not.“