Budgeting finances in 2023: Open banking and PFMs

Open banking allows customers to manage their money more accurately and efficiently by using today’s special financial management tools. Using these types of applications allows consumers to improve their financial skills, save money and budget more effectively. These services now take it a step further with the addition of easy-to-use investment options that allow users to not only manage their assets but also grow them.

In recent years, open banking has become an integral part of many industries including lending, accounting, identity and income verification, with consumer-oriented financial services. Open banking refers to the process by which third party service providers (TPSPs) can access customer financial information through a secure API connection to the bank. By allowing service providers to collect this data, they can create more personalized services and product offerings for customers and meet their needs more efficiently, creating a more user-centric customer experience. .

One way that customers can directly benefit from open banking is by using personal financial management (PFM) tools, which allow them to create their own budgets, manage their money, save money and overcome debt. Not only does this allow consumers to learn money-saving techniques and improve financial literacy, but it also allows them to leverage their investment nest egg.

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Open banking as the backbone of modern PFM

Open a personal financial management application for the bank, by allowing customers to connect their bank and neobank accounts directly to the device. Choosing this option allows users to view all their financial activities and payments in real time, in just one place. This gives them the ability to control all their money, and allows the internal PFM application algorithm to accurately analyze their data and offer personalized programs and advice.

With guided support, reminders and recommendations, customers can reach their financial goals, eliminate unnecessary expenses and subscriptions and increase their accounts. These savings can be invested in stocks, cryptocurrencies and other assets by users to create a stronger financial base for their future. In recent years, some of these applications have even evolved to allow customers to invest directly through the PFM system. Many players who have joined this wave of consumer property growth have made investing easier for beginners, by setting up models at low prices starting from £1.

One such application is MoneyBox, which allows its users to choose from three investment options, Cautious, Balanced and Adventurous, with different levels of risk associated with each. . These starter options allow inexperienced investors to quickly start their journey without a lot of room for customization, with each option having a different type of tracker currency, each with a different allocation. As their skills and knowledge increase, users can move to more customizable options, giving them more freedom of detail.

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Another option in this category is Plum. This app focuses on automation, allowing its users to set specific “smart rules” for their savings ability, which the tool then uses to gradually withdraw money from the savings account, or on a purpose account, such as for a party or a larger gift. Similarly, the tool allows the user to set investment guidelines with the amount of the guaranteed deposit, which the application will distribute to the selected stocks and investment funds.

Other apps are also jumping on this trend, with funding tool Emma releasing their own version of low-cost self-investing through their app in July 2022. The application now also offers commission-free stock trading with access to 2000 global stocks.

Giving customers control

With the world increasingly moving into the digital age, consumers now find themselves able to access financial services, assistance and opportunities through easy-to-use online applications. . Tools like personal financial management apps allow consumers to not only manage their money but also grow their assets, invest in retirement and invest in their future. Where previous generations had to seek expert advice and visit brick-and-mortar branches, today’s consumers can learn financial literacy online and invest in digital through direct channels.

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Linking all their financial accounts to one PFM tool through open banking allows users to view and analyze their financial health and make informed decisions about their finances, setting the course of action and investment in existing funds and recorded monthly expenses. This gives them more important protection, protecting them from decisions that are not understood or that may result in higher debts in the future.

About the Author: Rolands Mesters is the CEO and co-founder of Nordigen, the only freemium open source API that connects to more than 2,300 banks, making it Europe’s largest bank connectivity network. Rolands is a marketing and growth hacker with a passion for fintech and alternative lending.

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