How fintechs are putting a block on ‘problem spending’

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How much of a responsibility do banks have to try to curb “problem spending” among customers?

In the past, the approach has been pretty laissez-faire but with the rise of banks such as Monzo, things are changing.

Monzo Bank states that reducing problem spending and encouraging financial responsibility is at the heart of everything it does. In August alone, more than 14,000 people signed up for Monzo’s gambling block, which prevents any gambling transactions from an individual’s account.

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As Monzo reaches the level of more than three million customers, almost 150,000 of them have taken the active decision to switch on the gambling block. Less than 5 per cent of customers who have tried the function have switched it off, meaning that the vast majority keep the block in place.

“It’s a very simple on/off choice to activate the gambling block, but it’s deliberately a much more difficult process to turn it off,” explains Natalie Ledward, a vulnerable customer specialist at Monzo.

“We were the first bank to do it and we did it because customers asked us to – and because we thought it was the right thing to do.

“It came about because a lot of customers who had some kind of gambling addiction or problem were asking us if we could block transactions on their account.”

Monzo knew that the technology was available, as blocks can already be put on children’s accounts and some credit cards. “We knew the technology existed and customers wanted it, so we did it, but we did not expect quite such an impact.”

The gambling block was “reasonably straightforward” to implement, says Ledward, who adds: “We were a small bank, built from the ground up, and did not have to work from legacy systems.

“It’s a really simple toggle switch to turn the block on but if you ask to lift the block, it’s not so easy. There are two steps of deliberate positive friction – you have to reach out to customer support and request it and then there is a 48-hour cooling off period when you can change your mind, so training for staff in customer support was crucial.”

Monzo took advice from gambling addiction charities before implementing the block.

Ledward explains: “We designed it to curb those impulsive and sometimes compulsive moments – and usually that impulse has gone away during the 48-hour cooling-off period.

“We see it as a tool. We do not enforce the block but if we can help somebody control their spending –and if that helps them manage their spending, curb an addiction or help them save – then that’s a positive thing.”

Ledward maintains that the idea of doing social good is built into the fabric of Monzo and has been from the beginning.

She explains: “It’s about giving people the tools to understand their money and how they handle it – and moving away from scary and jargon-filled banking.

“The culture of Monzo comes from the founders, and everyone who joins is trained in what we are all about. We want to make the experience of banking better and we found that our staff really want to be part of that.”

Although it found that gambling was the main “problem spend”, Monzo has identified many more “financial problems and vulnerabilities” as the bank has grown.

“We want to empower our customers to manage their money and feel in control – as a result, we are exploring ways for customers to limit or block their card spending with merchants if they want to,” Ledward continues. “We have had many more requests for specific blocks for particular merchants, such as fast food providers, for example.

“We want to create a more universal tool, without the same stringent approach as the gambling block. The touch point will be different for each individual. We are still developing it and hope to be testing by the end of the year.”

Ledward stresses that both the merchant and gambling blocks were ultimately driven by customer requests and that the functions are completely optional.

“This is not something we want to impose on customers, but they can choose it if they need to,” she says.

“Monzo’s approach is all about responding to customers and giving them a depth of information to provide a clear picture of where their money is going.

“It’s about making people think about their money and whether there is anything they need to curb or control – and that’s much easier to do when you can click on each transaction in your account and find out more about it.”

Tips on how to stay mentally healthy

One in four people are affected by a mental health condition – and of these, close to four million will struggle financially. A further four million people are at risk of developing a mental illness as a direct result of their financial situation.

These are statistics used by Mental Health and Money Advice, the first UK-wide online advice service designed to help people understand, manage and improve their financial and mental health.

Mental Health and Money Advice is part of the Consumer Panel convened last month by FinTech Scotland, whose strategic development director, Nicola Anderson, sees exciting possibilities in this area.

“There is great potential to do positive things with individuals who might be going into a manic phase where they are much more likely to spend lots more money,” she says. “I think there is really interesting potential if banks can partner up with young fintechs and Mental Health and Money Advice to look specifically at finding answers to turning off spending at times like that.”

So how do you manage if you have a disorder that might lead you to spend excessively during, for example, a manic episode? Mental Health and Money Advice has these tips from Chris, who lives with bipolar, on its website. Chris finds these strategies useful around events like the pre-Christmas spending frenzy of Black Friday, which falls at the end of next month.

Keep your receipts It doesn’t always matter if you feel like you can’t stop it, just keep the receipts.

By keeping them it means I can return everything when I feel stable again. I’ve bought everything from Bonsai trees to theatre tickets for other people – there’s not really much logic in it at all!

Keep the tags on

It’s the same principle as the receipts – I can return them as soon as I feel stable again. I once bought a designer waistcoat that I really didn’t need and didn’t even fit me. When I got home, I didn’t want it, so the next week I returned it.

Try and eat something

Do you find that when you’re hungry, your weekly shop ends up containing lots of things you don’t really need? You end up buying things you would never normally buy! The same rule applies. If you are fuelled by coffee and cigarettes, the jittery, anxious, impulsive part of you definitely comes out.

Protect your money

I transfer as much as I can into a savings account every month. This means I am left with just enough to keep me going, so I will never end up spending my whole pay cheque. The other beauty of a savings account (or bond) is that it takes a couple of days for the money to transfer back into my current account, and by then I usually feel stable again.

Be kind to yourself

We already have to deal with a lot of emotions, and adding more on top of that isn’t a great idea. I try to be kind to myself and not to worry so much about what I have spent. If I follow all my rules, everything can be sorted out and no real damage will be done. For me, spending is a clear indicator that I am not well. Sometimes it’s hard for me to notice if I am unwell, as I am not always aware, but I find that by having these rules I can keep myself safe.

Visit www.mentalhealthandmoney advice.org for more information