(NYTIMES) – They promise to nudge you into saving more, negotiate your bank fees, cover overdrafts and help you pay down your debt. They will even cheer you on when you spend wisely and remind you when your bills are coming due.
These are the newest evolution of personal financial management tools, with the emphasis on personal.
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.
But as artificial intelligence has become ever more sophisticated, these tools – almost all of which are apps – have proliferated. It is almost impossible to say how many there are, but new ones seem to be coming on the market almost daily.
They are “more intuitive, more developed”, said Ms Chanelle Bessette, a banking writer at NerdWallet, a personal finance website that also offers its own budgeting app.
“These apps are getting to know their users a lot better – users are feeding them information about how they spend, and that helps the predictions become even better.”
The apps are essentially looking to become almost as good as a live personal adviser, but one that you do not 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.
“Their mission before was to make it easier for consumers to budget, but now they’re really creating features that enable consumers to buy stocks, apply for loans and autosave all on one platform,” said Ms Anisha Kothapa, a fintech analyst at CB Insights, which tracks business trends.
Companies are trying to stand out in a crowded marketplace, and while some are bundling more features to attract users, others aim to specialise.
Such apps are particularly popular for budgeting and setting goals.
In this area, Mint, PocketGuard and You Need A Budget (YNAB) often top “best of” lists.
Like all these tools, they require a user’s credit card, banking and other financial information to track spending and income levels and then automatically sort them into categories.
Each offers something a little different.
Mint provides free credit score checks as often as you like. 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.
“We really want people to be proactive, rather than reactive,” said YNAB founder Jesse Mecham.
“People think that budgeting means they forecast what they’re going to make and what they’re going to spend; we teach people to budget only with the money you have on hand right now.
“We want people to change their behaviour, and that comes with changing their thinking.”
Other tools are more focused on automatic savings and investing – they have become increasingly creative and like a game.
Qapital connects with a Web-based service, If This Then That, which allows users to set up rules for saving and investing.
If you want something that actively helps reduce your costs, some companies have services that look for ways to lower your payments or waive off fees.
Trim is one of the better-known tools – a rare one that is Web-based, not an app – 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.
Cushion scans users’ downloaded credit card and bank statements, looking for overdrafts and extra fees, said founder and chief executive Paul Kesserwani.
It then negotiates with financial institutions, either through their secure bank portal (if the customer gives permission), through online chat on the bank’s website or, if needed, through traditional mail.
Mr Kesserwani said: “Bank and credit card terms of service are so complex that’s it’s often easy for people to accrue fees.”
Because users are giving away some of their most valued financial information, security and privacy are critical.
And although all the personal financial management companies will promise your data will be held safely, “all apps are secure until they’re not”, he added.
It is not that these apps are in any greater danger of being hacked than, say, your bank or any other institution, but “the more people who have the information, the greater the risk”, Mr Bischoff said.
“I wouldn’t just sign up for apps willy-nilly.”
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