I confess to being a “late adopter” of technology. I didn’t get a mobile phone until years after everyone else and never really believed the internet would take off. Nevertheless, I can recognise a clever innovation and a couple have recently passed under my nose.
They are phone apps which essentially collate all your bank accounts, credit cards and savings accounts in one place and crunch your data into all sorts of interesting conclusions. For example, you can see how much you spend a month purely on groceries or taxis. There are other functions such as estimates of cash remaining, a countdown to payday and notifications of upcoming bills. Some apps allow you to compare your current electricity bill and/or savings account rates with other providers.
The leading apps include Yolt (which is owned by Dutch bank ING), OnTrees (owned by MoneySuperMarket) and Money Dashboard. They’re designed to help you manage your money more effectively and it does work. In a demonstration I attended by Yolt, an audience member signed up on the spot and immediately found he had paid his council tax bill twice.
Inevitably there is a fly in the ointment. You’ll have to hand over your bank details (but not your login password) to the app so it can get your data. This has rung alarm bells for most of the media: if you’ve seen any negative articles about “open banking”, this is what they mean. From Saturday, new rules force banks to share your data with third parties if you give permission. It’s aimed at trying to make banking more competitive but experts worry it will simply open the door to fraudsters.
Personally, I think security is less of an issue than what the apps will do with your information. The knowledge that Jane Wallace buys four bottles of prosecco champagne a week month could be quite valuable to my health insurer, not to mention the manufacturers of Veuve Cliquot, Lanson and so on.
But these downsides don’t mean you should dismiss the apps out of hand. It just means making a couple of checks before you sign up.
1. Check your bank lets you share details without any kind of liability on your part as not all banks have updated their terms to the new rules.
2. Most apps (at the moment) are “read only” so they can merely view your data and cannot make payment instructions. Pick one of these.
3. Apps will say in their terms and conditions whether they can sell on your data. If you don’t want this to happen, sign up to an app which doesn’t.
If you’re keen on budgeting, these apps are really great tools and clearly the way forward for banking. As for myself, being a late adopter, I’ll be signing up in about 2023 when I’m quite sure any problems will be ironed out and apps will be the everyday way to manage money.
See our SMM guide to savings accounts here.