Can an app really help people save money more easily?

New technology means new opportunities for people to manage their money. Head of Policy, Steffan Evans, explores whether money management apps work for people on low incomes.

For centuries people have looked for ways to better manage their money. The need to do so has been particularly acute for people on low incomes, for whom the effective management of money can be the difference between being able to afford all their household essentials and going without heating, food and other basics.   

The emergence of new technology over the last two decades, and in particular the advent of Open Banking in 2018, has opened up new opportunities for people to manage their money. The new technology has raised hopes that people will be able to manage their money more easily and more effectively, enabling people to save more, pay down debt or access more affordable credit.  

Over recent years a range of smartphone apps have been developed that promises to allow people to do just that. Apps such as Plum, HyperJar and Emma offer people a chance to manage their money in a variety of ways. From enabling people to visualise their money in various “pots” to rounding up payments and placing the difference in savings, these apps promise people the chance to improve their financial position.

Yet despite the potential of these apps, relatively little research has been undertaken into understanding how they work and in particular into understanding the harms and opportunities they present to people on low incomes. The Bevan Foundation has been working to address this research gap over research months, courtesy of funding provided by the Which? Fund. 

Do the apps really work? 

Our early findings paint a mixed picture. We have spoken to people who credit one or more of these apps for making a real difference to their financial position. We’ve heard from people who say that it is thanks to the apps that they were able to go on holiday last year and from people who say that they have managed to reduce their debt. Others report a less positive experience. Indeed, one person we spoke to was pushed into their overdraft due to the way that one app operated.  

Beyond these experiences there are two important findings from our early work.  

First, money management apps offer limited benefits to those who are on the lowest incomes. To be able to build up savings or pay down debt you need to have some money, however small the amount, leftover after you cover your essential costs. For people who are on negative budgets (i.e. for people whose incomes are not enough to cover their essentials), money management apps are of limited value. It doesn’t matter how cleverly you try and manage your money, if you haven’t got enough coming in, you won’t have any money spare to put away.  

For people who are on slightly higher incomes however, money management apps are potentially more useful. For example, a person working full time at the National Living Wage might benefit from some of the features offered by money management apps to better look after their money.  

Second, there is a general lack of awareness of money management apps across Wales. This is not a surprise; these apps are currently being used by a minority of people across the nation. But even if the apps themselves do not become more popular, some of their features already are. Most high street banks now offer a rounding up or “sweeping” service, whilst many provide people with an opportunity put their money into “pots”. There is a real need to increase understanding and awareness of how these features work so that people can harness them for good, rather than risk mismanaging their money.  

Over the summer the Bevan Foundation will be publishing a report setting out our findings on money management apps in full. It is clear that new technology really does present an opportunity for people to better manage their money, but that opportunity does not come without risk.