With the growing popularity of Internet banking, coupled with an increasingly online-savvy population, there has been a proliferation of locally developed Personal Financial Management (PFM) websites. PFM sites essentially provide a graphical overview of a user’s financial status and habits, and purport to assist people in curtailing wasteful spending and ultimately save more.
Which, given South Africa’s dismally poor savings history, sounds fantastic – in theory. Earlier this year, independent PFM provider 22seven – led by serial entrepreneur Christo Davel – made a somewhat controversial debut into this space, with Absa calling the service’s security credentials into question and warning clients not to share their private Internet banking credentials with any third party. Absa was specifically taking issue with 22seven’s US technology partner, Yodlee. Yodlee requires access to customers’ online banking in order to ‘screen-scrape’ or gather financial data. Absa clearly didn’t want to be left out of the PFM trend, however, and launched its own (albeit very basic) PFM service as part of its digital makeover, saying that more advanced features will follow. Nedbank doesn’t appear to share Absa’s security concerns, as it recently announced that it will be launching its own PFM product, also partnering with Yodlee to gather data.
This is good news for independent PFMs using the US technology provider, as it will likely put pressure on other major banks to allow access to customers’ online banking by third parties. Nedbank’s service, called MyFinancialLife, will be launched at the end of the month and will be available to everyone (not just Nedbank customers). It will give users the option of providing their login details so it can access other bank accounts and accounts at non-bank financial services providers. Unlike 22seven, which charges users a R70 monthly fee, MyFinancialLife is a free service, although ‘future functionality’ may come at a price. Another new entrant to the PFM fray, Moneysmart, is also offering its service for free. Although the service has been available to consumers since November 2011 in its BETA version, the company is now launching its official website after refinements – based on customer feedback – were made. Moneysmart will also be using the services of Yodlee, but it intends to address security concerns by offering users three methods to use the platform. They can choose to manually upload bank statements; manually add accounts and transactions, or automatically fetch transactions directly from their bank accounts. Moneysmart CEO Tobie van Zyl says that security was top of mind when designing the service.
“First of all, all accounts are anonymous,” he says. “This means we have no access to anyone’s personal details. Secondly, no transactions can be made on Moneysmart; it’s only used to manage money. Thirdly, Moneysmart uses bank-level security protocols and is verified by McAfee, VeriSign and TRUSTe,” he explains.
Van Zyl adds that Moneysmart is also a licensed and registered Financial Services Provider, which “affirms that we abide by the regulator’s rules.”
The Cape Town-based startup intends to generate revenue by recommending products and services to users based on their banking habits. Van Zyl is adamant that Moneysmart carefully vets the companies with which it partners, and third-party products/services are selected strictly on the basis that it can help consumers save more. Van Zyl doesn’t appear to be concerned about the fact that he is slightly late to the PFM party and competing with heavyweights (banks included). He maintains that the PFM services all have different styles, varying offerings, and are tapping into different profiles of customers.
“With more players on the market, the takeup is better,” adds van Zyl. “It’s nice to be at the beginning of a new trend in SA, and all of us are creating more awareness.”
Whether these services succeed – both in sustaining themselves and helping South Africans to save more of their hard-earned rands – remains to be seen.
Financial Planners and Institutions should partner with product providers to provide this invaluable financial tool to help individuals become better stewards of their household expenses. The key to wealth creation is saving. Your level of saving determines the level of your wealth over the long term. Spending reduces your level of wealth over the long term.
Having played with the Moneysmart tool in a couple of different forms, I have to say that it is incredibly powerful. I think one of the nice benefits of these PFM tools is that they don’t let you “guess” your budget, but draws on actual expenditure each month which gives you a far more complete view of your finances.