The impact of fintech on personal budgeting: are money management apps really helping?

One of the biggest drivers to fintech’s evolution has been the impact of fintech on budgeting. With the right tech, a fintech provider can immediately connect with the masses and grow exponentially – taking advantage of society’s digitalisation, with most people now having access to smartphone technology. Financial management apps have been a real gamechanger. Instead of having to visit a bank, or deal with poor customer experience on firms’ websites, fintech apps are designed to provide clean, efficient and rewarding user experiences.

A financial planner in your pocket

In a way, these are financial health tracking apps – we have apps to monitor our health, so why not our wallets? These are designed to be part of your daily consumer behaviour and help you budget, save and plan are often linked to your bank accounts. A popular aspect of these spending analysis apps is they give you all the information in the palm of your hand, presenting a dashboard of your financial situation and insights into where you spend and save. This beats logging onto your online bank account once in a blue moon! Another benefit of these apps is how they can link up to your friends and family, thus taking the pain, friction (and yes awkwardness) of paying back money or asking for reimbursements.

The best money management apps

Some of the most popular personal finance apps are as follows (available on all major app stores):

Emma

Number of users: 1.6m

Price: Free but other tiers available from £4.99 a month

Features: Tracks your finances, compiles all accounts in one place, offers users insights, easy subscription management, allows you to build your own stock portfolio and even links users to credit providers.

HyperJar

Number of users: Over 600,000

Price: Free

Features: Numerous budgeting features, offers users insights, links to numerous high street cashback providers, allows users to benefit from exclusive rewards, has a pre-paid debit card and children’s pocket money card.

Plum

Number of users: Over 2m

Price: Free but other tiers start from £2.99 a month

Features: FSCS protected, numerous budgeting options, offers users insights as well as a cash ISA, pension and investment facilities.

Snoop

Number of users: Over 1.2m

Price: Free but other tiers start from £4.99 a month

Features:  Tracks your finances, compiles all accounts in one place, offers users insights as well as a high degree of customisation including custom alerts and other notifications.

The need for money management apps

It’s easy to see why people use budgeting apps as, simply put, they need help with their money. Soaring inflation has created a cost of living crisis in many major economies, with people having to pay more for the essentials like groceries, rent and energy bills. This means people’s money has to work harder and, unfortunately, there is little margin for error.

To put this into sharp context, in September 22% of UK adults said they had to borrow more money than usual in the preceding month. And a further 27% would be unable to afford an unexpected but unnecessary expense of £850 or more. This has enhanced the need for personal finance support, and there is clearly a role for fintech for financial wellness.

The future of money management apps

Are these money management apps a success though? That is debatable and depends on various fintech adoption trends. For example, there is still some way to go with how many people use personal finance apps. Research shows only 14% of consumers currently use money management apps to budget.

There are also limitation challenges with money management apps due to financial services regulation. While users can easily access money management apps for budgeting and saving services - or go elsewhere and become market traders in numerous other apps - these offerings fall short of financial advice. This is because financial advice is a heavily regulated financial service and regulators are extremely wary about this being distributed online or via an app. Additionally, financial advice is expensive as advisers’ fees have to be covered. This means offering financial advice in a money management app is a very different prospect and this is unfortunately a limitation. It’s all well and good being able to use an app to easily set money aside for a holiday or new car, but what about if you want to set up a pension? Have questions about where’s best to invest? Or need to create a bespoke financial plan? Financial management apps are unable to help here.

However, this doesn’t mean there isn’t still excitement around money management apps. Their growing use is still encouraging and helping people face up to their finances more, instead of being something they try and avoid. Technology is also advancing and there are very exciting opportunities being posed by AI.

Right now, there is only so much money management apps can do with the data they have. Machine learning could enhance this, allowing for these apps to develop an in-depth understanding of users’ finances and behaviour, delivering bespoke recommendations as a result. Would this potentially stray into advice though, and would an AI financial adviser be legally sound or ethical even? That’s another topic (and another blog) but AI should enhance these apps regardless and the role they play in people’s everyday finances.

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