Financial wellness: Open Banking and the rise of money management apps
In January 2018 the Competitions and Markets Authority (CMA) forced the nine largest banks (Allied Irish Bank, Bank of Ireland, Barclays, Danske, HSBC, Lloyds Banking Group, Nationwide, RBS Group, Santander) to open up their data, heralding the arrival of Open Banking.
The initiative allows approved third parties, such as budgeting and savings apps, to access data in a secure and standardised way, to encourage competition and allow the consumer to better manage their finances.
Banking and the way we manage our finances is increasingly digital; according to Finder.com, 4.5m people use a digital-only bank and 8.5m intend to switch to one over the next five years.
Under Open Banking rules, banks have to make your financial data available to approved third parties in a standardised format – an open Application Programming Interface, or API – and may share it with your permission.
The overall objective was to make traditional banking more agile and convenient for consumers; Open Banking can be used for payment accounts that you access online or by mobile, such as personal current accounts, business current accounts and credit cards
There are also a large number of money management and budgeting apps to make your financial journey just a little less stressful and potentially save you money; apps must be registered with the Financial Conduct Authority (FCA) and join the Open Banking Directory.
All of the big nine UK banks have signed up to Open Banking, and despite the fact that the CMA did not require it of them, they have been joined by some of the challenger banks such as Starling and Monzo.
In total there are one hundred regulated Open Banking providers including third-party providers like apps and account providers like banks; the theory is that it should make it easier for us to access relevant financial products in the future.
A key benefit of Open Banking is that you can permission apps to access your data without having to hand over your login details; this differs from a technique called ‘screen-scraping’ operated by money apps such as Plum whereby you give the app your bank login details so it can access transactional data directly from your account.
Screen-scraping could see you in breach of your bank’s T&Cs if money were to go missing leaving you liable and is being phased out; sharing APIs is much more secure because you know exactly what information is being shared with each company and can withdraw permission if needs be.
Money management apps
Open banking has spawned a whole range of apps to help you track, save and manage your money with interfaces to a whole range of financial services; these are set to flourish in terms of number and sophistication.
If you struggle towards the end of each month, or have ever been too scared to check your balance, there are lots of apps that can do the hard yards for you.
Here is a brief look at some of the apps that are registered with the FCA; most are already on the Open Banking directory and others plan to join in the future; see which one will have the most beneficial impact on your wallet.
Money Dashboard, lets you view all of your accounts and assets in one place including current accounts, savings accounts and credit cards.
The platform currently supports 60 financial providers including major high-street banks like Lloyds, HSBC, Halifax and Santander
You can analyse your income and outgoings to see where your money is being spent and track progress towards your financial goals.
The budget planner feature lets you set limits, based on your previous months’ spending.
It has recently released integrations with three new account providers – Revolut, Chip, and Marcus by Goldman Sachs
Money Dashboard is free to use and available for download on Android, iOS and desktop
Like Money Dashboard, Moneyhub brings all of your financial accounts together in one place including bank accounts, credit cards, savings and borrowings, but it also allows you to add investment funds.
The app was built using AI and lets you set spending goals and analyses your purchasing habits; if you have any regular payments or subscriptions, such as a direct debit for home insurance, Moneyhub will send you an alert if there are any better deals available.
Moneyhub’s USP – its ‘Find Adviser’ option – can put you in touch with professional advisers over the phone; with your consent, it will automatically share all of the data you’ve connected to the app with them too.
Moneyhub is a subscription service and you can choose to pay a monthly fee of £0.99 or an annual fee of £9.99 Android or Web, or £14.99 from the App Store.
App-based budgeting account, Squirrel, is aimed at those that struggle to make it through to payday; it separates your bill money from your spending money, so that you can budget more effectively and set clear savings goals.
Once you have added your monthly expenses and savings goals, the app will release the money you need for bills when they’re due as well as spending money for the week.
The Barclays-run app focuses on having more money through saving rather than accumulating a little extra interest on a small amount.
A free 8 week trial of Squirrel is offered, then it is £9.99 per month thereafter; Squirrel is available on Android, iOS and Web.
Yolt too allows you to view your current and savings accounts and credit cards in one place; it sends you insights into your spending habits and identifies your major expenses.
Yolt is packed with features and has just introduced a new partnership with money transfer provider Moneytis, allowing users to find the best exchange rate when travelling abroad; this is one of many in-app features on Yolt, which allows its user to categorise more specifically than other apps.
The app allows you to manage your bills and subscriptions and it also offers a comparison service to help you find a better deal; Yolt is available on Andrid and iOS, and is free to use.
Bud and First Direct
Bud is a platform that connects your accounts and credit cards; however, it also allows you to add rewards schemes, investment funds, insurance policies, currency exchange services and a digital mortgage broker.
When Bud announced it was partnering with First Direct to produce a financial management app, around 2,000 of the bank’s customers participated in the initial trial; the iOS app is free to use.
Bean connects personal bank accounts and credit cards to track all regular payments, such as subscriptions and household bills, and alerts users to opportunities to save through switching provider or canceling altogether.
Syncing to online bank statements, Bean identifies recurring costs and notifies you when it is time to look for better deals and manages the switch; its dashboard allows users to track and analyse their spending across multiple bank accounts or credit cards.
Emma links up your bank accounts and even integrates PayPal, to give you a full holistic view of your finances; it tracks your subscriptions, lets you know which ones you’re not using much and alerts you when you’re getting close to your overdraft. It also has a fee tracker service which can give you more info if your bank charges you a surprise fee.
Most budgeting apps are controlled via a smartphone app, but Spendee can also be viewed on a desktop interface. You can add cash expenses manually, use its insights to set yourself manageable targets and use the ‘shared wallets’ feature to have a great overview of who paid for what and how much you spent it total. Spendee is only free with limited features but its well-designed interface means it’s still well worth a download.
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