Millennials and Personal Financial Management

Millennials and Personal Financial Management

Millennials may be less likely than other demographic groups to visit their bank manager in person, but it doesn’t mean they’re unconcerned about their finances.

A survey by Nielsen found that they are very discount-focused. They spend proportionately more of their income, than any other generation, on special offers and many of the retail apps on their phones are specifically for deals, with Groupon coming in as the 3rd most downloaded retail app, after Amazon and Ebay.

When it comes to budgeting their finances they may choose to use one of the many personal finance apps now available. But which ones are the most popular, and what do they offer?

In the UK, one of the first to gain traction was OnTrees which launched in 2012. Like many budgeting apps, a key feature is that it aggregates the spending data from all of your bank accounts across multiple providers and presents it in easy-to-understand graphics.

Launched one year earlier, the better-known Money Dashboard describes itself as a personal financial assistant. It too gathers data from the user’s various bank accounts and displays the information on easy-to-understand graphs. Money Dashboard also includes a simple budget planner to help set savings goals.

While they may argue otherwise, both offer similar solutions because both operate off the Yodlee platform. Yodlee is the company that powers many of the available budgeting apps. It works by taking direct feed data from banks or by “screen-scraping” (computerised reading) the information from the banks’ apps, using the login provided by the user. Yodlee then aggregates the data from all of the user’s accounts and generates the graphs.

Indeed many of the apps which are popular in the US, and which pre-date their UK cousins, also use Yodlee.

Mint is one of the most popular, and as well as providing users with spending information, it goes a step further by offering a bill-payment service. The app monitors when bills are due and sends the user a reminder who can then make a payment through the app, or schedule regular payments. It also provides users with offers on credit cards, term deposits, car insurance, loans and pensions.

As yet, the UK-based companies don’t offer such added services. Indeed OnTrees promotes the security of the fact that no-one can move your money, “not even you”. How they intend to monetise their offering is unclear. What they do have access to, obviously, is data: data about what you spend your money on, where and when, how much money you earn, whether you have any savings or a mortgage, and so on. This is potentially valuable to financial services companies looking to engage customers with relevant offers, as well as to retailers more broadly.

Across Europe, Numbrs offers users in Germany notifications of spending, reminders of scheduled payments, daily summaries and monthly budgets, while also providing a payment facility.

Looking to the future, these services are set to become more widespread for a number of reasons:

The first is that there is a move by some players in the industry to truly become the personal financial manager for their customers: moving beyond the UK model of just providing the spending information, beyond the Mint model of also proposing offers, to more dynamically advising consumers on all sorts of spending decisions. These may include analysing utility bills against market averages and proposing cheaper alternatives. It may be noting that the user bought a car or refrigerator 3 years ago and that now it’s the economically optimal time to buy a new one – with a number of special offers from selected retailers of course – or any number of other similar financial decisions.

The second reason is the growing availability of data about everything that we do, the power and precision of the analysis that can be carried out on it, and the growing realisation of the value of such information to retailers in making relevant and timely offers to consumers.

Finally the EU’s Payment Services Directive 2 will force banks, from 2017, to make account data easily available to companies such as OnTrees and Money Dashboard, with the account holder’s permission. (Even with Brexit on the horizon, the UK regulators have expressed support for more Open Banking, and so this Directive or something similar will come into force in the UK).

Find out more about one of the budgeting apps developed by Vipera, used by banks across Europe and Asia.