John Ellmore, Director of KnowYourMoney.co.uk, explores how technology has driven such dramatic change within the personal finance industry
Since the turn of the century, technology has played an increasingly significant role in our day to day lives. From smartphones to home assistants to AI chatbots, people are now relying on tech more than ever to simplify or improve all manner of tasks.
The coronavirus pandemic has only accelerated this trend. The rapid spread of COVID-19 in 2020 has halted “normality” and social distancing measures drove consumers from in-person to digital services. As such, 57% of consumers now prefer to use online banking tools to manage their finances; to compare, this figure sat at 49% pre-COVID-19.
The personal finance sector has certainly been no exception. Consumers had already become increasingly reliant on tech to research, compare, invest and manage their finances – and even more so over the past six months.
The evolution of comparison websites
The personal finance industry has come a long way in the past 20 years. This rise of financial technology (fintech) has streamlined many processes for both service providers and their customers. In short, fintech has made the vast, complicated world of personal finances far more accessible to the average consumer.
One of the biggest changes in the personal finance space brought about by tech has been the emergence of – and the increasing popularity of – comparison websites. These have become the first port of call for a consumer when it comes to considering their options and saving money, for everything from their home insurance to their energy suppliers. Indeed, recent research from the Competition and Markets Authority revealed that 85% of UK consumers have used price comparison websites at some point in their lives.
So, why are comparison websites so popular? In short, they reduce the amount of time needed when searching for financial products, whether that is insurance, mortgages or savings accounts. The online platforms gather all the necessary data and display all of the options in an easy-to-digest format.
Yet the offering has been constantly evolving over the past two decades. With more advanced technologies coming into play in recent years, it is now possible for complex algorithms to make snapshot assessments of risk, better establish an individual’s credit score, and rapidly analyse vast amounts of data to return more targeted results. The result is a more tailored, personal service.
The rise of digital banking
The evolution of comparison website has come alongside the rise of digital banking. Whether through established banks or challenger banks, consumers have increasingly turned to online and mobile platforms to manage their finances.
As with other areas of our lives, people today expect services to be available at their fingertips, with minimal fuss or delay.
Slick apps, real-time payments and financial analysis to boot, digital banking tools allow users to always be keyed into their account activity and have made monitoring spending easier than ever. Not only does this help consumers keep an eye on their funds, but it also offers an additional level of security. Indeed, instant access to one’s bank transactions makes it far easier to spot fraudulent account activity.
With so much pioneering technology disrupting the industry – both when comparing products and managing them – consumers are better placed than ever to remain in control of their finances. So, the question is now, what does the future have in store for the personal finance sector?
The age of personalisation
Traditionally, when consumers think of financial advisers, this might conjure up an image of men in suits. But the future is automated, and such regulated advisers could also take the form of digital chatbots, powered by artificial intelligence (AI) in the coming years.
Although this technology already exists and is currently able to field consumers’ financial questions, it is still in its infancy. At the moment, bots are just able to provide generic automated advice but bolstered by AI, further disruption to the industry is on the cards.
With such rapid developments, it is becoming increasingly clear that the personal finance sector – and certainly the world of financial comparison platforms – is heading in one direction: personalisation and consumer empowerment. That is, after all, what the so-called ‘fintech revolution’ has promised in recent years: greater choice, transparency and hassle-free experiences.
The days of generic advice, off-the-shelf products and long-waiting times to procure a new financial product (open a savings account or take out a new credit card) are over. Quite rightly, one in two consumers believe that financial guidance should be personalised. What’s they expect a wide choice of options when considering personal finance products, and for such products to be customised more to their circumstances. Tech is and will continue to enable this and in an increasingly sophisticated way.
All in all, the future looks bright for the personal finance sector. Consumers increasingly have access to innovative tools they need to navigate complicated decisions and manage their money with ease.