But the continual improvement of financial services, driven in part by Scotland’s booming fintech sector, enables us to understand our spending better now than ever before.
“Cash rules everything around me,” was the refrain of “C.R.E.A.M”, by the Wu-Tang Clan, commenting on the big-spending US rap music scene in the 1990s. But the music stars of the future are unlikely to have the same reverence for dollar bills, pound notes, or indeed any other kind of physical currency.
Thanks to the rapid development of smartphones and financial technologies, we all now have the ability to pay for pretty much anything without ever having to visit a cash machine.
And fintech companies are now working closely with the established banking giants to better understand how people engage with both money and technology.
Whether it’s getting an approval for a mortgage, or simply saving for a rainy day, technology is helping tailor better products to help us achieve our financial goals.
Such products may not inspire any pop or rap hits of the future, but they are already an invaluable tool for many people.
To develop such a consumer-led approach, the country’s fintech firms are busy trying to understand what drives our spending.
Stephen Ingledew, the chief executive of FinTech Scotland, has had years of experience in the financial sector, where he has played an active and major role in implementing customer-focused and technology-enabled initiatives.
As a former senior executive for large companies, such as Standard Life and Barclays, as well as smaller financial enterprises, he is ideally placed to help both with mutually beneficial enterprises.
“Organisations are not just focusing on the emotional side,” he says. “What we’re involved in is how fintech people engage with money and technology.
“The interesting thing about fintech is it does not start with finance or technology – it starts with the human need. Then companies work back to find out how they can better serve that need. It could be spending, it could be saving, it could be anything to do with money.”
Ingledew admits that in the past, the big banks often adopted a one-size-fits-all approach to products. However, he is confident that fintechs can help change that.
“Because you start with a human point of view, you are more likely to actually meet people’s real needs,” he adds. “That’s something financial services has not always done very well in the past. It has tended to rather push products on people rather than start with the need. Fintech is turning that upside down.
“Fintech is helping banks take a much more consumer-led approach, rather than simply trying to sell a product.”
Role of money
The FinTech Scotland boss is understandably keen to promote the innovative work already being done north of the Border. He cites MoneyMatiX as one example of a fintech company which helps customers better understand where their cash comes from and where it goes each month.
He says: “MoneyMatiX is all about helping people understand the role of money – they call it financial literacy. If you’ve got a better understanding, you can make better decisions – whether to spend, whether to save, how best to pay.
Castlight Financial, which offers real-time affordability and financial capability analysis, is another.
Ingledew says: “Castlight Financial, based in Glasgow, helps customers really understand their ability to borrow money.
“Rather than taking a credit score, they are understanding someone’s behaviour. How money is going in and out, how they are spending. How that could be improved so they can get a low rate of interest when they borrow.
“They are focused on behaviour. One of those aspects is people’s emotional responses to what we buy and how we spend it.
“The key thing about data is that it’s not just about financial data, or looking at someone’s financial record in a very narrow way.
“What affordability assessment does is look at people’s data. Two people may get the same salary but their behaviour may be very different. One may be very frugal, one may be very spendthrift. That’s where behaviour becomes very important – instead of just looking at where the money comes from and where it goes out.”
While the average bank customer may not be intimately familiar with fintechs, that does not mean that they have not already benefitted from their work.
“None of these fintechs are going to become household names in the near future, like HSBC or RBS. What they are doing is helping the big institutions to reinvent themselves,” Ingledew observes. “They are behind the scenes.”
“The strength of Scotland is we have these big companies here. Scotland is a small market, but there is the ability to experiment by fintechs working alongside international companies based here.”
Ingledew believes that products developed by the sector in Scotland could have a world-wide impact, saying: “The big opportunity is being able to reinvent banks around people and communities.
“It’s not a given, but technology is the enabler that could allow that. If you apply the right kind of thinking – by starting with the human need – that provides the right kind of opportunity to bring in these new technologies to better understand their money than before.
“To some degree that has already happened – we all have smartphones – but that doesn’t mean we’ve become much better educated on finance. So you have to ask what else can be done to make them feel more empowered with their money.”
But what do the fintechs themselves have to say about emotion and how it drives our spending?
Tynah Matembe and Helene Rodger, co-founders of MoneyMatiX, say they first encountered financial illiteracy while working with young people who had no financial guidance because the adults and carers in their lives were financially illiterate themselves.
The duo point to research which suggest parents in the UK pay out £2.7 billion per annum in pocket money – an emotion-driven spending if ever there was one – yet 75 per cent of parents are struggling to manage their own finances, let alone supporting their children.
The pair have five children between them and they wanted to teach them the true value of money. MoneyMatiX, they say, was born out of the desire to create adult financial role models that can pass on healthy money habits to the next generation.
“Our aim is to help transform lives by creating financially capable communities,” say Matembe and Rodger. “In our work, we remind people that besides death, dealing with money is the most unavoidable aspect of life.
“Closely linked to this is the fact that people are emotional beings, meaning that all habits are a mixture of several learnings, experiences and exposure that merges into personalities.
“Fintech companies like MoneyMatiX can help influence this phase of habit formation, which in turn influences spending practices.
“Technology can help drive financial conversations and shape the experiences and exposure to money, helping create a healthy spending environment.
“With the emergence of sophisticated technologies like artificial intelligence and Blockchain, the opportunity to role-model healthy spending habits – especially for the next generation – is ripe.”