Important financial matters used to be handled almost exclusively in person. However, with the increase in digitisation, recent limitations of in-person contact and communication, and changes in behaviour and habits surrounding personal finance have spurred on changes (Szota, 2021). Personal finance applications have become increasingly popular. In 2020, time spent on finance apps was up 45% from the previous year, and the number of global iPhone users who activated Apple Pay grew by more than 65 million people (Szota, 2021).
Personal Finance is changing
The rise in the desire to track and manage income along with the increase in mobile application use drive expansion in the personal finance market. Growing at a compound annual rate of 5.7% from 2020 to 2027, the market is expected to reach $1.57 billion by 2027 (Allied Market Research, 2020).
Personal finance has been revolutionised by technologies. Dedicated apps powered by artificial intelligence have greater access to consumer data. AI can predict customer saving and spending habits and help prevent poor choices (Iacurci, 2020). The software can predict how a person may spend their money even before they even do, meaning that personal finance apps have become financial coaches at the fingertips of millions around the world (Iacurci, 2020).
What is Open Banking?
Open banking is a banking practice that securely shares financial information, such as consumer banking transactions and other financial data, to third-party financial service providers (Estevez, 2020). Sharing data is done through the use of application programming interfaces (APIs) and only with the consent of customers (The Balance, 2020). Open banking is the driver behind both innovation and competition in the financial industry (Cahill, n.d.).
Why Does Personal Finance Use Open Banking?
Open banking enables financial service providers access to bank account information needed to deliver accurate services and products for their customers.
Open banking helps improve the relevance of services for customers through specialised third party providers (TPPs). Personal finance apps can analyse spending habits, deliver dashboards and offer customer-specific product recommendations (Rousseau, 2020). Furthermore, open banking helps deliver fast and secure payment services. Payment Initiation Services provide customers with the reassurance that their money is safe (Rousseau, 2020).
Some Personal Finance Companies You Should Know About
Mint is a personal financial management website and mobile app for the US and Canada. The company uses open banking to access bank data in order to enable users to track investments, loan balances and transactions as well as create budgets and set financial goals through a single user interface (Anderson, 2020).
Spendee is a Czech financial assistant platform that helps people manage their finances in an easy and convenient way. The company uses open banking to analyse their financial situation and aims to guide users towards a better financial health (Open Banking, n.d.).
Wallet by BudgetBakers is an income and expense tracking app that is present worldwide. The app allows users to keep track of expenses and align with budget goals by using open banking data. Wallet uses account information data to deliver reliable and useful services to their customers.
What’s to Come?
Most technology surrounding finance has revolved around creating budgets and monitoring spending. Financial firms are currently working on building a new generation of services that automate even more of consumers' day-to-day financial decisions (Iacurci, 2020). The aim is to make the decision process easier for those who have a hard time budgeting (Iacurci, 2020). Eventually, personal finance apps could take over these important decisions to the degree that apps will make decisions for you and move money behind the scenes.
Allied Market Research. (2020, September 9). Personal Finance Software Market Size to Grow $1.57 Billion by 2027. Intrado.
Anderson, C. (2020, Febuary 10). Not the same: Open Banking, Open APIs and Banking as a Service. BBVA.
The Balance. (2020, October 11). What Open Banking Is and How It Will Affect You.
Cahill, H. (n.d.). InvoiceFair. The Evolution of Open Banking: Connectivity breeds digital competition.
Estevez, E. (2020, August 27). Open Banking. Investopedia.
Gale, M. (2021, May 11). How You Can Elevate The Future Of Personal Finance To Change The World By 2030... For The Greater Good With Joseph Deitch. Forbes.
Iacurci, G. (2020, March 1). These iPhone apps know how you’ll spend and save money — even before you do. CNBC.
Open Banking. (n.d.). SPENDEE s.r.o. Open Banking.
Rousseau, P. (2020, October 12). Personal Finance Management and Open Banking. Klarna.
Szota, W. (2021, March 18). Personal Finance Apps – what happened in 2020. TOOPLOOX.