Innovation in Banking: Moven and Simple – the new generation of bank accounts which help consumers spend wisely and achieve financial security
Most bank accounts help you spend money, but penalise you for small mistakes. Moven and Simple are part of a new generation of bank accounts that will help you spend your money wisely – helping you to meet your financial goals. They are changing what it means to use a bank account – moving it from a tool to make transactions to a tool to manage your money.
Conventional bank accounts offer you a debit card, the ability to deposit and withdraw cash, to set-up direct debits and monthly statements. If you spend too much they offer you an “arranged” overdraft with monthly/daily fees or interest. If this limit is exceeded and you go into an “unarranged” overdraft then the charges will be even higher – some banks even levy a monthly charge if you want to avoid going into your unarranged overdraft by automatically rejecting any payments you try to make. Poor money management can mean expensive fees or the need to resort to payday loans.
Innovative new entrants are taking a different approach. Instead of helping you spend money, they help you manage it and achieve your financial goals. The feedback they provide is instant, automatic and displayed clearly.
Moven – Spending gauge
Moven offers instant notification of each transaction straight to your smartphone and provides analysis of how your spending compares to previous months. If you are spending at a slower rate than previous months then the gauge is green, if it’s a faster rate then it’s red. By linking your Facebook account you can see how upcoming events may affect your spending. Moven categorises your spending into “Needs” – essential living expenses; “Wants” – discretionary spending such as dining out and entertainment; and “Savings”. You can connect multiple accounts to the Moven service and it will offer a combined view of your spending across all of the accounts.
Simple – “Safe-to-Spend” balance
Simple calculates your “Safe-to-Spend” balance by deducting all of your upcoming committed expenditure. Its “Goals” function enables you to define and set savings goals and makes savings less painful by putting small amounts of savings each day towards meeting savings targets, or to make impulse savings using your phone. You can set aside money for specific purchases and Simple will use your transaction data to notify you when these purchases have been made. Using the account in this way, reduces the volatility of the customer’s spending – helping to avoid running out of money just before payday. To help you understand your spending, you can add notes to transactions or search your spending using simple questions such as “Weekday lunch” or “Utilities” to bring up relevant categories of spending.
“The old way, “Current Balance”, means you see how much is in your account, but then you have to remember to mentally deduct your upcoming rent, the groceries you’re buying this week, and the gift you have to buy for your cousin’s wedding. Safe-to-Spend does all that math for you” – Simple
Proactive money management
These type of new entrants offer the potential to help consumers budget and manage their spending – avoiding unnecessary overdraft fees or the need to take out a payday loan. They have substantial advantages over the services offered by existing banks. Many banks offer text alerts if your account is close to going into unarranged overdraft. These help those consumers for whom it is just a matter of transferring money across from a savings account, but do nothing for the financially stretched who have no wriggle room in their budget. These consumers need information to help them proactively manage their money earlier in the month. If they are considering making a purchase which could push them into unarranged overdraft later in the month then they need to know now – not when it is too late to do anything about it.
Promoting financial inclusion
We know that rather than making use of direct debits some consumers with bank accounts continue to withdraw all of their money each month and budget in cash: “you pay by cash because you know where you are from one day to the next”. These types of innovative banking business models could help consumers bridge the gap between monthly receipt of wages or benefits and expenditure which could occur weekly, monthly or quarterly. This can contribute towards consumers controlling their finances and help them achieve greater financial security. The Department for Work and Pensions could study the impact of these services as it seeks to help more consumers engage with the banking system and manage the introduction of Universal Credit.