Staying relevant in the age of mobile finance

Mobile finance is permeating every aspect of our lives. According to a survey Google conducted in the UK, 75% of those surveyed had 1-2 financial apps installed on their phones. 44% used their apps daily whereas the most common activities were checking balances and making payments. This number corresponds with the usage of retail apps in general: An identical 44% of mobile phone users surveyed in the same study use retail apps on a daily basis.

Most banks offer mobile services, thus contributing to the fact that physical visits to a branch or ATM may soon be an obsolete phenomenon of a pre-mobile age. Frequent closings of high-street branches are testimony to this development. However, banks are lagging behind when it comes to the more innovative possibilities of everyday finance.

One of these is investing. A recent development is the advent of so-called micro-saving apps. Geared at non-investors or people that might think they are not earning enough money to invest, these apps divert small amounts of money into a savings account in the least noticeable way: by transferring the change resulting from payments to an investment account. The most successful micro-saving app is Acorns. It rounds each purchase with a phone app or debit card up to the next dollar (the app is not yet available outside the US). So, if a cup of coffee costs $1.80, the difference of $0.20 is automatically transferred to an account without users having to lift a finger. The app does the investing for them, so no industry-specific knowledge is required.

Acorns invests the savers’ spare change into the exchange-traded funds (ETFs) of large investment managers such as BlackRock and Vanguard. Many investment companies have already shown great interest in micro-saving even though micro-savers are not their traditional clientele. As the Financial Times analyzes, a micro-saving app makes use of the “nudge” factor, i.e. gentle unnoticeable changes to someone’s behavior. In other words, small investors may promise to become big ones somewhere down the line if they are nudged in the right direction, for example by a micro-saving app.

Another widely hailed innovation is Simply Wall St. Aimed at the non-professional investor who does not have the time, experience or knowledge to analyze complex market data, it breaks down the information needed to assess a stock’s performance into digestible bits of information that are visualized in easy-to-grasp infographics. Users can even turn on a beginner’s mode that explains what is behind company valuations, so first-time investors can learn as they go. A neat feature called snowflake draws data from 30 different sources to create a snapshot of a company’s health, past performance, earnings, value, and future potential performance, making an overall assessment and comparisons quick and easy. Data is provided by S&P Capital IQ which, according to the app’s website, is “the same data the professionals use”.

As opposed to Acorns, Simply Wall St leaves actual investment decisions up to its users. For investors who trust the habits of billionaires like Warren Buffet, an app developed by the company iBillionaire Capital provides them with information and performance data on the portfolios of 16 billionaires. Investors using the app can keep up with their favorite billionaires’ investment decisions and are notified when they sell or buy. However, relying on this information for your own investment decisions can be misleading. Obviously, the billionaires that are tracked by this app are in a much better position to lose money than the average investor and they also apply elaborate hedging strategies for risky investments. The app is therefore only recommended for people with more profound investment knowledge.

However, the mobile app which has been topping the US and Canadian download charts in the finance category for years is the personal finance manager (PFM) Mint. Owned by the technology company Intuit, this PFM app helps users track and manage their money as well as look out for investment opportunities. However, Mint is not attracting as many new users as it used to. As opposed to the many bank-owned PFM apps that have followed in its wake, Mint must rely on financial institutions for its data. And the more frequently people check their accounts, the more important secure real-time data feeds become. As Digiday UK analyzes, technology companies must reach deals with banks in order to guarantee that their apps reflect real-time spending. Apparently, Intuit has overcome cybersecurity issues and reached deals with Wells Fargo and JP Morgan Chase whose customers can now authorize their banks to share data with Intuit’s apps.

The fact that innovation often does not originate within a business but is driven externally is not new.  What fintech is demonstrating today to financial services is a pattern that is all too familiar from other industries like television, publishing or music: technology start-ups tapping into and disrupting core markets. It remains to be seen whether financial services will be able to stay abreast of these developments.

This article was written with information from:

• Think with Google (March 2016): Apps And Mobile Sites: Consumption Across Finance, Retail And Travel
• Financial Times Fund Management (17 June 2016): Millennials set to embrace micro-investing
• Millennial Money (19 October 2016): Simply Wall St review
• Digiday UK (3 March 2017): 10 years on. Once a first mover, Mint must work to stay relevant