{"id":109049,"date":"2021-03-09T11:03:37","date_gmt":"2021-03-09T11:03:37","guid":{"rendered":"https:\/\/fin2me.com\/?p=109049"},"modified":"2021-03-09T11:03:37","modified_gmt":"2021-03-09T11:03:37","slug":"a-smarter-app-is-watching-your-wallet","status":"publish","type":"post","link":"https:\/\/fin2me.com\/business\/a-smarter-app-is-watching-your-wallet\/","title":{"rendered":"A Smarter App Is Watching Your Wallet"},"content":{"rendered":"
This article is part of our new series, <\/em>Currents<\/em>, which examines how rapid advances in technology are transforming our lives.<\/em><\/p>\n They promise to nudge you into saving more, negotiate your bank fees, cover overdrafts and help you pay down your debt. They\u2019ll even cheer you on when you spend wisely and remind you your bills are coming due.<\/p>\n These are the newest evolution of personal financial management tools, with the emphasis on personal.<\/p>\n Such money management software is not new; Quicken, the granddaddy of the industry, started in the 1980s to make bill-paying and budgeting easier and evolved as the industry did. Two of the top apps, Mint and Credit Karma, are more than 10 years old.<\/p>\n But as artificial intelligence has become ever more sophisticated, these tools \u2014 and almost all of them are apps \u2014 have proliferated; it\u2019s almost impossible to say how many there are, but new ones seem to be coming on the market almost daily.<\/p>\n They are \u201cmore intuitive, more developed,\u201d said Chanelle Bessette, a banking writer at NerdWallet, a personal finance website that also offers its own budgeting app. \u201cThese apps are getting to know their users a lot better \u2014 users are feeding them information about how they spend, and that helps the predictions become even better.\u201d<\/p>\n The apps are essentially looking to become almost as good as a live personal adviser, but one that you don\u2019t pay much for and that can live in your pocket. Some charge a monthly or annual subscription; others are free and make money through referral fees they collect when a user buys the financial products or services promoted on the site.<\/p>\n \u201cTheir mission before was to make it easier for consumers to budget, but now they\u2019re really creating features that enable consumers to buy stocks, apply for loans and autosave all on one platform,\u201d said Anisha Kothapa, a fintech analyst at CB Insights, which tracks business trends.<\/p>\n Companies are trying to stand out in a crowded marketplace, and while some are bundling more features to attract users, others aim to specialize.<\/p>\n Such apps are particularly popular for budgeting and setting goals; in this area, Mint, PocketGuard and You Need A Budget often top \u201cbest of\u201d lists.<\/p>\n Like all these tools, they require a user\u2019s credit card, banking and other financial information to track spending and income levels and then automatically sort them into categories.<\/p>\n Each offers something a little different. Mint provides free credit score checks as often as you like (it\u2019s a \u201csoft\u201d check, so it won\u2019t hurt your credit score). You Need a Budget, also known as YNAB, relies on a system called zero-based budgeting, where every dollar is put into an account, such as holiday spending, emergency fund and so on, so that you end up with zero.<\/p>\n \u201cWe really want people to be proactive, rather than reactive,\u201d said Jesse Mecham, founder of YNAB. \u201cPeople think that budgeting means they forecast what they\u2019re going to make and what they\u2019re going to spend; we teach people to budget only with the money you have on hand right now. We want people to change their behavior, and that comes with changing their thinking.\u201d<\/p>\n Other tools are more focused on automatic savings and investing; they have become increasingly creative and game like. Qapital connects with a web-based service, If This Then That, which allows users to set up rules for saving and investing.<\/p>\n For example, the Qapital app can connect to your Fitbit so that every time you hit a goal (walking 10,000 steps) or fail to meet one (not sleeping enough), you put money toward one of your savings or investing goals. Or it can be unrelated to anything you do \u2014 just have it sock some money away when the temperature hits 75 degrees, when it rains or if you visit a favorite place.<\/p>\n As natural language processing, a part of artificial intelligence, becomes more refined, some of these apps are creating a relationship with their users. Charlie, an app focused on reducing debt, is a chatbot-based penguin who serves as a supportive friend.<\/p>\n \u201cCharlie celebrates your progress, no matter how small or big,\u201d said Ilian Georgiev, Charlie\u2019s co-founder and chief executive. \u201cOne thing we\u2019ve heard over and over is that people want a judgment-free environment.\u201d<\/p>\n If you want something that actively helps reduce your costs, some companies have services that look for ways to lower your payments or lop off pesky fees. Trim is one of the better-known tools \u2014 a rare one that is website based, not an app \u2014 that, among other things, identifies recurring charges, such as subscriptions, to make sure you still want them. It can also negotiate with your internet, cable and phone company to lower your payments.<\/p>\n Cushion scans users\u2019 downloaded credit card and bank statements (how often depends on the level of subscription you pay for), looking for overdrafts and extra fees, said Paul Kesserwani, the company\u2019s founder and chief executive.<\/p>\n Cushion then negotiates with the financial institutions, either through the secure bank portal (if the customer gives permission), through online chat on the bank\u2019s website, or even through traditional mail if needed.<\/p>\n \u201cBank and credit card terms of service are so complex that\u2019s it\u2019s often easy for people to accrue fees,\u201d Mr. Kesserwani said.<\/p>\n It took four years, he noted, to build up the data set and technology stack to accurately detect bank fees, figure out which ones to negotiate, determine how to approach each negotiation and then communicate with the bank automatically on the consumer\u2019s behalf.<\/p>\n The bells and whistles may be nice, but the benefit of these apps lies in forcing users to face how much they\u2019re truly spending and where it ends up.<\/p>\n \u201cA budget is a fundamental step in financial literacy, and just tracking your spending versus your income is so illuminating,\u201d Ms. Bessette said.<\/p>\n Personal financial management tools can make it easier to budget, save and invest, but you do have to actually use them. According to a report by CB Insights, after one day, retention hovers around 23 percent and falls to just under 6 percent after one month.<\/p>\n And while users can jump around and test various apps \u2014 and try a combination of them to cover specific needs \u2014 Ms. Bessette noted that there are benefits to staying with one app for years. \u201cI\u2019ve used Mint for about eight years, and it has all my historical data, which makes it much easier to see trends,\u201d she said.<\/p>\n Because users are giving away some of their most valued financial information, security and privacy are critical.<\/p>\n Read the apps\u2019 privacy policy \u2014 it\u2019s best to look for a policy that promises it will never sell your information to a third party, said Paul Bischoff, editor of Comparitech, a tech research and comparison site with an emphasis on cybersecurity and consumer privacy.<\/p>\n And although all the personal financial management companies will promise your data will be held in a virtual Fort Knox, \u201call apps are secure until they\u2019re not,\u201d Mr. Bischoff said.<\/p>\n It\u2019s not that these apps are in any greater danger of being hacked than, say, your bank or any other institution, but \u201cthe more people who have the information the greater the risk,\u201d he said. \u201cI wouldn\u2019t just sign up for apps willy-nilly.\u201d<\/p>\n