Open banking and the rise of personal financial management apps

Open banking has made big changes in how people deal with their money. It lets you share your financial info between different banks and apps, which has led to new kinds of apps for managing your money. These apps, called personal financial management (PFM) apps, give you lots of control over your money, like making budgets and saving.

Open banking started because regulators wanted more competition and new ideas in banking. Laws like the one in Europe called PSD2 and the UK’s Open Banking Standard helped make this happen. Now, lots of people use digital banking and PFM apps, and by 2024, it’s expected that over 3.6 billion people will be using them!

PFM apps use open banking to bring together all your money info from different places. They do things like:

1. Making budgets: PFM apps look at what you spend and help you make budgets. For example, if you want to save money for a new video game, the app can suggest how much you should save each week to reach your goal.
2. Saving: You can set goals for saving money, and the app can help you reach them. Let’s say you want to buy a new bike. You can tell the app how much the bike costs and when you want to buy it, and it’ll tell you how much you need to save each month to get it on time.
3. Managing subscriptions: PFM apps can find subscriptions you pay for regularly and help you cancel ones you don’t need. Maybe you forgot you signed up for a music streaming service. The app can remind you about it and help you cancel if you’re not using it.
4. Investing: Some PFM apps can even help you with investing by tracking your investments and giving you advice. If you have some money saved up and want to invest it, the app can suggest different ways to invest, like buying stocks or putting it in a savings account that earns more interest.

But there are also challenges. We need to make sure your information stays safe while still letting these apps work well. Developers are using fancy tech like encryption and secure logins to do this.

Some PFM apps also use cool stuff like AI and machine learning. They can learn about your spending habits and give you advice before you have money problems. For example, if you usually spend a lot of money on snacks, the app might suggest bringing homemade snacks to school instead of buying them to help you save money.

All this is changing how people use traditional banks. Banks now have to improve their digital services to keep up with these apps. This competition is making banking better for everyone.

In the future, open banking and PFM apps will keep getting better. New tech like blockchain and smarter AI will make these apps even more helpful. And as more people trust these apps, they’ll become even more popular, helping everyone manage their money better.

Additionally, some PFM apps offer educational resources to help kids learn about money management. They might have games or quizzes that teach you about things like budgeting and saving. These apps can make learning about money fun and easy!