The changing face of money management
When it comes to personal or business money management, expense manager app, Solo Expenses has always believed that knowledge was power. That’s now been seen and acted upon in the UK with the move towards Open Banking, and in Europe, with the development of PSD2, the revised Payments Services Directive. But what does it all mean? We point the way in this blog…
There’s no denying that technology continues to change the world – but when those changes are allied to money management and legislation, the changes become seismic.
That’s the point at which the UK has just arrived, with the government’s Competition and Markets Authority, or CMA for short, mandating Open Banking.
Two years of investigation have led us to this point; two more will see adoption of the new rules, which one financial expert predicts will cause a revolution in finance.
And as if that weren’t enough, HMRC has announced that the annual tax return as we know it could be gone by 2020, replaced by what are predicted to be simple digital updates, according to Edward Troup, the organisation’s Executive Chair.
Conrad Ford, founder and Chief Exec of alternative lending provider Funding Options, says the Arrival of Open Banking is a huge moment. “Imagine a business owner being able to raise an invoice, finance a different one, and transfer funds to a supplier all from one smartphone app. Application programming interfaces, or APIs, theoretically allow all of these kinds of functions — which will surely lead to a technology gold rush for control of the business banking sector. You could even say a financial services revolution is on the horizon.”
APIs are already a significant part of modern technology software development, and are expected to unlock a financial revolution by giving agile startups and challenger banks access to the same data established banks have long guarded as their own.
New service; new horizons
Ford predicts the revolution will force dominant banks to compete on a level playing field, putting up against the wall the exclusive access to banking data unavailable to smaller businesses that has given the mainstream its edge for years. With read-only access to banking data alternative lenders will be better placed to make more informed and faster lending decisions; with read/write privileges, they could not only look at account data, but create it too. It’s a small distinction, but has huge implications, says Ford. “With data creation access, a whole world of financial services becomes possible.”
Ford also believes that Open Banking will support the UK’s financial technology, or ‘Fintech’ sector. Now the UK has voted to leave the EU it remains to be seen just how time and legislation will impact on the EU’s revised Payments Services Directive, which was proposed three years ago.
Seeing API-driven banking coming over the horizon, as PSD2 or simply Open Banking, traditional banks need to act fast to steal a march on the competition by exploiting the traditional client relationship they hold – but they need to do it quickly before what’s been described as a ‘feeding frenzy’ beings.
Let’s be careful out there
But, says Rob Partridge, MD of Kingston Capital Finance, although online banking is the norm it’s not without its risks. “It is not uncommon for some banking apps to allow the user to apply for loans or overdrafts and move money from one place to another, swiftly and easily. I believe that the recession has a lot to do with this. It has opened up the market to FinTechs and Peer2Peer lenders providing a much broader investment and borrowing product range, which can only be good for consumers and businesses.
“However, there’s a danger that in the rush to go digital, users could more easily fall victim to cybercrime,” says Rob. Acknowledging the advantages of online banking, he advocates taking great care to preserve customer and lender interaction and the trust developed within them. Failure to do so could lead to a wave of cybercrime. He says: “From a business perspective, a relationship cannot be gained through an app. It must be grown on understanding the needs of customer and organisation alike. All businesses should be very thorough about their due diligence before entering into commercial arrangements just because an app makes them easy, and this is especially true for small and micro-businesses which might not be alive to the risks. If in doubt, take advice. In fact, take advice anyway.”
Solo Expenses got there first
Any organisation that can create financial and oversight money management tools will help its clients to achieve tighter financial control. But money management apps are not so new. Solo Expenses recognised the benefits of tighter financial control achieved through systematic and thorough expense management as long ago as 2003, when we developed a free-to-download cloud-based smartphone app which has been continually enhanced since then, growing our customer base to include users in more than 90 countries in the process. Users like it because it’s secure as well as effective, when used diligently.
But for Solo Expenses, which might have been described as a fintech company a decade ago, had the word been coined, this is not just about technology, and nor is it about money – although that’s a large factor in the equation. It’s about empowerment; about helping users to make more of their personal and business money, and as such opening more opportunities. And that, one might argue, is exactly what the CMA has sought to do by mandating Open Banking, and the EU is doing with PSD2…