This article was first published in the second-quarter 2013 edition of Personal Finance magazine.
The chore of analysing our spending prevents many of us from undertaking a basic budgeting exercise that is at the core of keeping our finances in line. So it’s puzzling that some banks continue to frown upon the use of internet, cellphone and tablet applications designed to take much of the tedium out of discovering where our money has gone each month.
Three years ago, this column focused on the first personal financial management tools developed for South Africans: Nedbank’s Personal Money Manager (http://www.nedbank.co.za/website/content/PersonalMoneyManager/) and Pastel InCheck. You download your bank statements and import them into the tools, which categorise your transactions so you can see just how much you spend on groceries, clothing, your home, your vehicle, entertainment and eating out, and so on. Personal Money Manager can depict your spending patterns in the form of pie charts or bar graphs, and enable you to compare your spending and income from month to month or against budgeted amounts.
InCheck has since been withdrawn, and people using it were moved on to Pastel My Money.
While InCheck allowed you to import statements from any bank, Personal Money Manager is limited to statements from Nedbank’s current and savings accounts.
Although the tools constituted a great leap forward in terms of saving you the trouble of sifting through your transactions, categorising them and totalling them up, at the time they were launched, people in the United States and Australia had long had access to personal financial management tools that could automatically log into their bank accounts and extract information about how they transact.
In the US, you can choose the extent to which third parties may access your bank accounts; therefore, you can allow a personal financial management tool to read your account but not to transact on it. If your budgeting tool can receive an automatic feed from your bank accounts, you are spared the trouble of downloading and importing each statement, as well as the problems that arise when statements are not compatible with the tool. Your budgeting tool will also be up to date each time you consult it.
Early last year, a new entrant to the South African technology market, 22seven (www.22seven.com), developed a personal financial management tool that can access your bank accounts and import information about your transactions automatically. 22seven uses technology developed by a US company called Yodlee that has been offering this service to consumers around the world for more than a decade.
After 22seven’s launch, South African banks were quick to warn their clients that in order to use 22seven and Yodlee’s services you needed to disclose your personal identification number (PIN) and password, and that doing this would be a breach of the terms and conditions of their online banking services.
Despite the bad publicity surrounding its launch, 22seven continues to offer its services and vouch for their security. You can try out 22seven’s services for free for 30 days; thereafter they cost R70 a month.
Since 22seven’s launch, two banks have responded positively. First National Bank (FNB) now allows its clients to set up a secondary user profile with “view access” only. This profile has a dedicated username and password.
And in July last year, Nedbank launched MyFinancialLife (www.myfinanciallife.co.za), which makes use of Yodlee to aggregate the information it receives about your spending and, unlike Personal Money Manager, accommodates the accounts of other banks. You don’t even need to be a Nedbank account holder to use it, and it’s free.
Justin Bradshaw, head of personal financial management at Nedbank, says in addition to analysing transactions across institutions, MyFinancialLife is “in the cloud” and updates when you log in, whereas Personal Money Manager is an “offline” tool.
Bradshaw says the key to ensuring the security of your accounts is disclosing to the tool only two of the three items of information required to transact on your accounts. These three items are your username, password and PIN.
MyFinancialLife automatically accesses all the accounts you hold at Nedbank. You have to enter only the username and PIN of the Nedbank accounts of your spouse or children if you want to link their accounts to MyFinancialLife. FNB clients need only their dedicated username and password to link their accounts to MyFinancialLife.
Before launching MyFinancialLife, Nedbank introduced another security measure for its accountholders, called “Approve it”, which is activated whenever they perform a “sensitive transaction”, such as adding a beneficiary or making a once-off payment.
Unlike the one-time passwords (OTPs) sent to cellphones for use on banking websites, “Approve it” passwords and messages arrive by cellphone but are responded to by SMS. The additional security in this is that you are not at risk of unknowingly entering your OTP on a spoof website if you have been phished. Users of MyFinancialLife also need to use “Approve it” every time they log into the site.
However, you could still be the victim of fraud involving a phishing attack and a SIM card swap. This would result in the fraudster receiving SMSs and “Approve it” messages intended for you. Account-holders who rely on SMSs or “Approve it” messages need to be alert to this risk.
Users of accounts that require more than two of the three key items of information to link to the tool can instead download their statements themselves and import them into MyFinancialLife.
MyFinancialLife is a powerful tool. In a test run, the spending analysis worked really well, identifying a large proportion of my transactions and categorising them correctly. Those that the program did not analyse were categorised relatively quickly via a change on a drop-down menu, so that future transactions from the same shop or supplier could be recognised and categorised correctly.
You can track your actual spend against your budgeted spend and set savings goals in which you specify how much you want to save over a certain period of time.
A great feature is that you can ask for “alerts” to be emailed or SMSed to you to warn you when you are about to compromise your budget or your savings goals. For example, you can set an alert to warn you when you are half way to your credit card limit or have exceeded a budgeted amount.
A net worth calculation within MyFinancialLife gives you a consolidated view of your financial position based on your linked accounts and/or non-financial assets, which you can add manually.
The “calendar view” allows you to track your debit orders against payments that have to be made, and enables you to ensure that you always have sufficient funds available to meet your debit orders.
Since the launch of MyFinancialLife, at the beginning of this year, 22seven was bought by Old Mutual, the group that also owns Nedbank.
22seven chief executive Christo Davel says the company is still in a “honeymoon phase” but is working closely with Old Mutual and Nedbank.
Pastel My Money, from Pastel Accounting, also uses Yodlee to update your financial status automatically by accessing your linked accounts. However, unlike Nedbank, Pastel charges R15 a month for this service. If you do not want to use the automatic updates but rather import your statements, you can use the site’s services for free.
The site (www.pastelmymoney.co.za) warns that it cannot update your status automatically where banks (Investec and Capitec, for example) use additional security measures, such as requiring an email or SMS simply to log in.
Pastel My Money accommodates three different users and three households. Pastel also allows you to upload smartphone photographs and scans of till slips and other records of expenditure. This could be useful for keeping records of your household contents for insurance purposes, because you will have proof of the purchase and the purchase price.
Pastel My Money automatically assigns transactions to a category, and you can compare actual spending with your budgeted expenditure.
Managing director Steve Cohen says the banks’ reaction to 22seven blew the security risks out of proportion, because millions of people around the world are using the services of websites backed by Yodlee. He believes all the banks will develop their own personal financial management tools, and indeed Absa has confirmed that this is what it is doing.
Absa’s head of digital banking, Adrian Vermooten, says a networth tool on its internet banking site already allows you to see the combined value of your Absa accounts, as well as any shares and unit trusts you own. A budget analyser will be next.
However, clients of banks such as Absa and Standard Bank should proceed with caution, and perhaps stick to downloading their statements and importing them into one of the three tools until these banks change their stance on liability for disclosing your log-in details.
Vermooten says you should not disclose your password or PIN to a third party, because you will be liable for any losses that might occur as a result of fraud.