Consumers spend far more time concerned with their day-to-day banking and budgeting than they do thinking about their long-term savings
Aberdeen Standard head of retirement Gregg McClymont’s recent Money Marketing column correctly identifies the challenge of achieving consumer engagement with pensions.
A pensions dashboard solely accessible via the single guidance body is doomed to failure even before it even launches. Such a service would focus too much on pensions in isolation, exacerbating the lack of engagement McClymont calls out.
That said, we do still urgently need a dashboard-type service and I now believe this is best achieved by expanding on the structure put in place for open banking to embrace not only pensions but all other types of medium- and long-term savings too.
In the digital world, the most important thing to achieve is being that app or service the consumer goes to as their primary source of information on a single subject.
From a financial services perspective, consumers spend far more time concerned with their day-to-day bank account and budgeting than they do thinking about their long-term savings. If we can link the former to the latter, we can encourage consumers to think more about saving as part of their everyday financial lives.
Our recent Making Savings Affordable report identified a range of techniques being applied by new entrants that the industry can learn from. Start-ups like Emma and Chip are using open banking to help consumers make better financial decisions.
For instance, Emma links together users’ various accounts and creates a series of reports on how they spend their money. Regular alerts warn users if they are at risk of incurring unnecessary fees through overdrafts or other costs, even highlighting which outgoings will tip them into debt if they do not provide other funds to pay for them.
It also identifies how much it is safe for the user to transfer to a savings account and still meet their monthly outgoings, based on their spending patterns.
Chip takes a slightly different approach. It analyses the user’s income and expenditure and notifies them of small amounts they can safely move to savings, going so far as setting up the transfer to a separate account unless the user rejects the nudge. These are typically amounts between £5 and £30 a time.
In each case, spending and budgeting is gamified in a way that is interesting and engaging, meaning a process many find boring is presented positively.
Moneyinfo has done a lot of work with advice firms to build digital relationships with clients. This includes creating fully white-labelled apps that can be download direct from the client’s app store of choice.
One of the most popular features is the ability to add details of their own property, including the price paid, which links to land registry data to track how the value changes on a month to month basis.
This is a great feature for baby boomers and generation X, whose houses are an integral part of their wealth. I will be interested to see how they can come up with something similar for Generation Rent.
If companies like Emma and Chip can persuade consumers to manage their money differently by giving better information, can we not add long-term savings into the picture? If Moneyinfo can help consumers track the value of their houses, can that start a conversation about how it will contribute to their income in retirement?
As open banking moves from a pilot to a real-world service over the next few months, banks will look to use it to build deeper relationships with consumers. But consumers will be very careful who they are willing to share their data with. Who do clients trust more? Their adviser or their bank? If it is not the former, are they really a client, or just a consumer?
If we want to achieve the engagement in long-term savings essential for the nation’s prosperity, as well as our industry’s profitability, we need to make sure the opportunities of open banking are extended to cover all areas of savings.
Ian McKenna is director at Finance & Technology Research Centre