Personal finance management tool designed by moneysmart to help consumers keep track of their money and spending has been shut down. In a statement, moneysmart said: “We’re announcing our departure from moneysmart. As of the 1st of May 2015, the financial management tool will no longer be operational. However the moneysmart community blog will continue to live on.”
The tool was originally launched in September 2011 with the aim of helping people manage their spending, as well as “pay off their debts faster and find savings.”
Tobie van Zyl, moneysmart CEO and Stefan de Klerk QA manager of Limitless Technology Group note that when moneysmart was launched the initial public response was positive. However, they point out that over time the tool became “somewhat unsustainable” as, according to them, people don’t want to budget.
But Justin Bradshaw, head of personal financial management at Nedbank Retail believes the problem runs deeper than that.
“Customers really like the idea of budgeting and knowing where their money goes and knowing where all their money is. But really the problem with it is they don’t appreciate the effort that is required with that. What I mean by that is budgeting is not something that happens automatically, it’s kind of like gym; you don’t just lose weight because you have a gym contract. You have to put a bit of effort in and categorise your spend and take the time to actually understand your money.”
He added: “Conceptually I think the reception has been very favourable. I think people appreciate the need for such a tool and they appreciate that they should be using it. Actual usage on the other hand is obviously not as high as we would like.”
According to Bradshaw, people are open to registering for these tools, however, he pointed out that people don’t often want to face up to the truth about what their financial situation really is.
“As an example, on MyFinancialLife, when you log on one of the first things you see is your net worth, and people who are in debt don’t like seeing a big red number that [indicates] they owe the bank money, so they close it and don’t go back,” explained Bradshaw.
Trust in money management apps
Bradshaw highlighted that public trust in money management apps is a problem. However, he noted that apps that are run by banks and other financial institutions, such as Nedbank and Old Mutual are more likely to gain public trust, as in some instances you already have access to some of the information required by the app.
“Customers worry about who has access to this kind of [information]… Also some strange concerns come up, whether SARS (South African Revenues Service) can see and things like that. I don’t know why people think that SARS can’t see already, but none-the-less, they don’t want to have everything in one place where someone can just access and see.
“The newer generation doesn’t really have an issue with it, but particularly the older generation are less technologically native, so to speak, and they are more apprehensive around that kind of stuff,” said Bradshaw.
According to van Zyl and de Klerk, trust was never a problem for moneysmart as they had expected and planned for trust to be an issue with the public. “While we provided an automatic connection option (connecting your Internet banking profile directly to the tool), we also added a manual option to initially build trust with our users, which worked well. We additionally made sure we had some of the best Internet security and privacy policy companies’ seals of approval on the platform in order to further instil trust, for example McAfee, TRUSTe, and VeriSign.”
Issues with categorising spend
These systems will only display information and results according to the data that you input into the app. Bradshaw pointed out that part of using these tools for budgeting and managing your money is categorising where you spend your money and on what.
According to Bradshaw, the effort that people need to put into categorising their money on these apps is not always understood. “I think by-and-large there is understanding, I don’t think budgeting is a really difficult concept for people to grasp. I think where the lack of take-up takes place is where the effort is required.”
He added: “People started off with the best intentions, and two weeks later when they have a whole lot of uncategorised spending on these applications, that requires first a memory [of where you used the money] if you’ve left it too long, and second a bit of time to go through it and categorise it. If doesn’t work out the way people expect, then the fall off occurs.”
Bradshaw suggested that people take a little time every day to categorise their spend for that day, as it will ultimately reduce the amount of work and effort needed to manage your money rather than leaving it all to the end of the month and trying to work out what you spent where.
Furthermore, Bradshaw noted that if you make managing your money a habit, it becomes less of an effort.
Trust vs. security
Hand-in-hand with the issue of trust is people’s concerns over security. Bradshaw highlighted that the technology financial management apps come with built in security.
Companies such as Yodlee provide the technology to Nedbank and other companies who run financial management apps. Bradshaw revealed that Yodlee makes use of bank grade type security to protect users’ information, this includes restricted access to the data mart with access control.
Nedbank has added security on top of the security provided by Yodlee, with its approver technology, which it and other banks use to confirm when users log on to the internet banking and online banking profiles.
According to Bradshaw, security is not really an issue when it comes to the up-take of these type of tools, but rather trust. This is a result of banks stressing the importance of not giving your account details to a third party in case of fraud.
“I think that is the issue here, because all the banks have been so proactive in making people aware that phishing is so rife in this country, obviously when third parties show up and say we can offer this service, please give us your banking credentials, people will be sceptical about that.
“Regardless of the security in place, which like I say is top notch, I think it’s more an element of trust. People are saying, I’ve been told not to do this and now you’re saying do it, and that doesn’t feel right [to some people],” said Bradshaw.
The end of the moneysmarttool
Van Zyl and de Klerk state: “We learned that people actually don’t want to budget, regardless of how much education and explanatory, self-help content was provided. This resulted in a low lifetime value per customer and retention rate.
“Furthermore, our financial ecosystem was difficult to integrate into and to deliver financial products at a single click to customers became hard to execute. Bundled with excessive technology overheads and a high cost of acquisition per customer, the lifetime value of the active users couldn’t deliver a convincing enough ROI in the short term.
“Throwing more money at it did not make enough sense because the technology is complex to build, requires a great deal of development resources and patience to perfect. As a start-up, you’ve got to look at your funding runway vs possible ROI in a five-dimensional way and reconsider your approach on an active basis in order to sustain your business. Pivots are natural and this process taught us a lot about where the market is actually at, specifically with regards to corporates.”
These challenges and issues led to the developed of a new business-to-business model. “We went on to develop our first B2B product, which ultimately started generating more revenue than the budgeting tool as we had corporate distribution, banks and lenders starting to pay us for the service to offer for free to their customers,” said van Zyl and de Klerk.
The company is in the process of changing to the Limitless Technology Group. De Klerk points out: “[We] have achieved great success with our open Banking Data API which allows the ecosystem to tap into easily accessible technology for powering customers with credit reporting, budgeting, wealth management and product origination data.”
Was the tool a failure?
Van Zyl and de Klerk added: “We just want to make clear that we do not think of moneysmart as a failure, it rather evolved into something else, as many businesses tend to do. I think you are soon going to see in the market some amazing financial applications, built on our technology as well as the knowledge we gathered through moneysmart.
“It’s one thing to have 48 000 customers and only a small percentage paying, it’s quite another to have 10 major clients and access to a couple of million users, all the while delivering real value to the entire ecosystem.”
Moneysmart is not the only personal finance management tool available to consumers. Other similar apps include the Nedbank MyMoneyMap and Nedbank MyFinancialLife, as well as 22seven from Old Mutual.