As an industry we are fully aware that engaging people with savings, whether that be long or short-term, has always been a struggle. We have been battling for many years to get consumers to understand the need for savings and, while we still have a long way to go, the industry is taking steps in the right direction.
Auto enrolment has been hailed as a successful utilisation of behavioural science, whether through engagement or inertia, for better financial outcomes. Understanding why people behave in certain ways towards savings could allow the industry to better engage with them. It is clear that communication will be key in this and there are initiatives, such as Open Banking, that can help.
Open Banking allows apps to use shared data to personalise product recommendations and inter app tracking. The hope is that, with enough learning from how a user spends and saves, it will also be able to prompt investors at the right time to encourage them to save more.
Many fintech apps, such as Moneybox, Emma and Yolt, are already using nudges (whether all their users enjoy being nudged to save or not remains to be seen) to send ‘friendly’ reminders to people that they have X amount of money in their account, or, they need to save X amount of money to meet their goals.
While this can be highly beneficial to users, the danger is that they are nudging people at the wrong time. For example, towards the end of the month when users may not have available funds to save.
By tying in Open Banking data however, this should give a more complete picture of spending habits and allow providers to be more tactful in when and how they nudge users. Nudging people at the right time and illustrating the returns that savings could earn if invested might do more to encourage them to invest and grow those savings. Comparisons could also be offered to show the historical analysis of an individual’s savings account. Using the data available from Open Banking, analysis could be performed to show the return on capital for saving versus investing.
Chris Daems, Director, Cervello Financial Planning said: “We are using an online service called Deposit Sense which helps us provide the best returns to clients with significant levels of cash. We are adding a huge amount of value to a lot of our wealth clients who have money in cash just sitting there and shows that the value we are adding isn’t isolated to their longer-term savings goals but to their short-term ones too”
There are several apps that are already this step ahead and using Open Banking to improve how they interact with users. One example is Monzo Bank, the digital mobile-only bank from the UK that has trebled its user numbers to 750,000 in a year. In the app, through the use of API’s, you are able to share your data with other banking and non-banking apps alike. This allows across app data to be used collaboratively with the end goal being personalised product suggestions and recommendations.
While there is still much more to be done around educating people on the benefits of long and short-term saving, it’s clear that initiatives such as Open Banking represent exciting new avenues through which we can better engage and serve consumers.