\Most Americans know they need a budget and, according to a survey from Bankrate, many have one. More than 80 percent of respondents said they have a budget; where they differ is how they keep track of it.
The most popular way to keep track of budgets is with pen and paper - a surprising preference in an increasingly digital world. Just 18 percent of people use a computer as a budgeting aid, the same percentage of respondents who admitted to only keeping track of their spending in their heads. This can be a dangerous method of budgeting, with no way to review past transactions and a tendency for people to justify purchases that may not be the best idea.
Another method of keeping track of finances and sticking to a budget is with a smartphone app. While just 8 percent of all respondents said they prefer this method, that number jumps to 22 percent when just looking at millennials.
It's no secret that millennials love their phones and the boundless capabilities their devices have. This pattern is important for credit unions and other financial institutions to take note of. While many institutions have taken great strides in improving their online capabilities, creating apps that offer financial tools and developing methods of serving customers without requiring branch visits, there is still plenty of work to be done.
Gaining consumer attention through mobile offerings
Credit unions have the ability to be educators to their members and teach them how to create realistic budgets and manage their money. However, more than half of millennials don't think their current financial institution offers anything different than any other bank out there, and more than 70 percent don't care much what their institution has to say, according to the Millennial Disruption Index.
Instead, they turn to other budgeting apps to help them keep their money in order. This presents a great opportunity for credit unions that want to regain or improve trust and satisfaction between themselves and their members. Providing budgeting tools that are easily accessible through their own mobile apps could:
- Be a differentiator between them and competitors, such as other credit unions or big banks
- Help members plan their finances in a more intelligent way
- Entice more people to become members
- Show members that they are technologically advanced and care about member values
CheatSheet pointed out that Chase Bank recently warned consumers against using budgeting apps because they are a potential security threat. Sharing banking information with others, even advanced mobile apps, could have the potential to deliver information into the wrong hands. At the very least, the app could sell some of your basic information to marketers.
However, CheatSheet also noted that Chase, and other financial institutions, have something to lose to these apps: consumer trust and business. After all, most millennials think the best upcoming financial innovations will come from outside the traditional financial industry. The Millennial Disruption Index found that nearly three-fourths of consumers would be more excited about a new financial offering from Google, Amazon, Square, PayPal or Apple than they would be from their own financial institution. About one-third don't think they'll need a bank at all in the future.
Obstacles to overcome in creating financial apps
To combat these negative opinions from millennials, credit unions and financial institutions will have to increase their offerings by providing them with what they want - mobile budgeting tools. According to PaymentsSource, there are currently two standards that financial institutions can follow in the pursuit to provide mobile financial tools to their members:
- OFX 2.2: Open Financial Exchange was the first financial data ecosystem that allowed consumers to use combined data using Intuit's Quicken and Microsoft Money. The updated version, which came about in March, allowed users to access their account using tokenization.
- DDA: Durable Data API was released last October and was developed to standardize authentication and data APIs.
CheatSheet observed that building sophisticated budgeting apps takes a good deal of financial investment, as well as skilled professionals. It's also crucial that they be secure. PaymentsSource also remarked that developing these tools as a financial institution could be more difficult than as a company because of the heavy regulations present in the financial industry.
However, these obstacles must be overcome if credit unions want to give their members the services and tools that are in high demand. It's clear that the way of the future is mobile, and there are plenty of companies that are already offering the services that consumers crave. Credit unions would benefit by interrupting their influence and offering a tool of their own.