Money Management: How Banks and Fintechs Can Get the Nation Saving

David Duffy, CEO, CYBG PLC

David Duffy, CEO, CYBG PLC

Concerns about the UK’s spending and saving habits continue to grow. Newspapers’ personal finance sections are full of headlines lamenting the condition of retirees’ pension pots, millennials’ sizeable overdrafts, and the nation’s increasing credit card debt, among other issues.

The number of statistics are striking. Recent ONS data revealed that over half of 22 to 29-year-olds in Britain currently have nothing in a savings account. Another piece of research from the Money Advice Service, meanwhile, showed that in 2018, nearly half of all adults (44 percent) were hiding a debt worth over £4,000 from friends and family. Figures like these are especially concerning when you consider the current climate of economic uncertainty. Bank of England’s Gertjan Vlieghe recently expressed his fear that British workers’ lack of savings has left them ill-prepared for the labour market slump that would likely accompany a no-deal Brexit.

"By tracking spending and saving, platforms are beginning to forecast users’ future financial information and account balance at given points"

Money management is a serious issue, and one that financial institutions—including us at CYBG and Virgin Money—should enter into a dialogue on.

This is just one of the reasons for our recent Bank to the Future report, an in-depth look at what the banking landscape, including customer saving and money management, might look like over the next three to five years. Produced in conjunction with futureologists Foresight Factory, it is a comprehensive study of successful innovations in the financial services industry combined with data forecasts of changing consumer needs in order to anticipate how banking infrastructure might evolve.

One theme that emerges very clearly is the power that technological innovation holds to bring change, and improve our day-to-day approach to money.

New Digital Tools to Enhance Money Management

The Bank to the Future report looks into the plethora of new digital tools and apps emerging to help consumers track spending, budget effectively, and save more. Micro-saving or micro-investing apps are one good example. As the terms suggest, this refers to saving very small amounts regularly. This could be via weekly, monthly and one-off transfers, or through the redirection of digital spare change as consumers spend. By using an app to round up every purchase to the nearest whole number, for example, and putting the extra pennies away, users can accumulate savings over time.

Start-ups are also emerging to help improve levels of transparency around credit scores. New tools explain the process in simple terms to consumers, giving advice on how to boost them. Promoting increased awareness should help people manage their finances more mindfully. Some companies are also developing alternative ways of estimating a person’s financial reliability, looking at non-traditional metrics such as profession, lifestyle habits, utility bills, and social media data.

Perhaps the most exciting are the services in development to predict how someone’s current financial behaviour might affect their long-term economic prospects, powered by data analytics. By tracking spending and saving, platforms are beginning to forecast users’ future financial information and account balance at given points. These systems could help consumers avoid debt, or prompt them to make the most of any savings opportunities. These are just some of the new technologies emerging to assist consumers. We will likely see these enhanced and new ones spring up as more account aggregation propositions come into play as part of open banking.

Collaboration Not Competition

The potential these new money management tools hold is clear. To maximise their value to customers as quickly as possible, however, we need to ensure banks work closely with the companies and start-ups behind them.

Recently we have seen a shift, and a new enthusiasm for collaboration. FinTech companies are no longer looking to simply replace banks, and banks are no longer looking at these new players as threats. We have moved towards a model of mutually beneficial relationships, and both sides appreciate what the other can bring to the table. Banks like CYBG and Virgin Money have a strong customer base, trusted brand name, and expertise in risk and regulation. Fintechs bring agility and fresh ideas that can be scaled. Combined, the prospects for success are much greater.

We already work with a number of Fintechs, technology companies, and other digital service providers putting this into practice. For instance, we operate strategic partnerships with PayPal to improve digital payment options for customers, Salary Finance to support innovative customer lending, and Go Compare to provide an energy supplier switching service.

We do not see these companies as a threat but rather an opportunity to foster innovation in financial services by working in partnership to deliver improved customer outcomes. From that, encouraging better saving habits and money management is just one area where collaboration will be highly valuable.

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