I am worried. This time it isn’t inflation, interest rates or markets. It is you and your financial data. Since the Facebook crisis, most of us grasp that data is an asset – one that can be sold to advertisers and promoters. But still not enough of us grasp quite what that means for financial apps.
In our new world of “open banking” – which requires banks and building societies to make your account data available to other companies, at your request – lots of new apps, promising to help you manage your finances, are springing up. You sign up (free!). You link all your accounts, assets and borrowing to the app. You can see everything in one place (no more manually updating your own spreadsheets!). The app, be it Moneyhub or Yolt in the UK or Clarity in the US (which has just been bought by Goldman Sachs for an undisclosed sum), then gives you “powerful insights” into your spending habits and the tools to help you manage better – “nudges” to pay bills, and to save when you can.
I love this concept and so do lots of you – 250,000 people have already signed up to Yolt. We all want to find a way to reduce the admin of our financial lives. But before we rush in, we need to think about how it can be that such very useful services can be free. The answer, of course, is that they are less services than marketing machines. Their business plans rest on using all they know about you to make commissions by “helping you find better deals” – steering you to advisers, or to new products.
The key thing? They are going to know a lot about you. As I have said here before (and will keep saying until everyone gets it), the likes of Google and Facebook can make pretty good guesses about what you need and what you want. A neatly set-up banking app doesn’t have to. It knows. Where you go, what you eat, what you earn, what you own, what you owe – it’s all there. Perhaps you think the fact that you are soon to get engaged is a secret. But to anyone who knows you have been spending more on flowers, dinners à deux, and the odd overpriced ring, it isn’t. And the affair you have seven years later? If your personal card is being used in a luxury hotel just outside the M25 and your joint account card is being used in a south London Waitrose, odds are that secret isn’t safe either.
Perhaps the app will help you out by suggesting a new personal loan or a good pension specialist. You may find this personalised nudging helpful. But it’s worth remembering that you are paying for it with the last vestiges of your privacy. Is that what you really want? It is, I think, worth a few minutes careful consideration (for more on this, listen to our latest podcast). For some happier uses of technology to offer you something personalised, see our cover story, where Mike Tubbs explains how the future of medicine is all about you – in a good way.