Imagine you're walking into Bloomingdales, your shopping weakness, when your smartphone starts to suddenly buzz. As you pick up the device to make the vibrations cease, a voice message from your spouse says, "Honey, put your cards away. Step away from the register."

You won't have to only envision that scenario for much longer. Cambridge, Mass.-based startup ImpulseSave is working on folding the above capabilities - which it calls Danger Zone - into its eponymous mobile app that encourages consumers to just say no to unneeded purchases. The to-be-born application upgrade is designed to bring "playful fun and delight to our users in keeping their goals and aspirations front of mind," says co-founder and chief executive Phil Fremont-Smith.

To use the existing ImpulseSave features, consumers provide the company with their checking account details to create new savings accounts that are backed by Leader Bank NA, a nationally chartered community bank. In turn, when a consumer has an urge to buy something like jeans, she can tap on her ImpulseSave mobile app and send the amount she would have spent on the item into her savings account instead. ImpulseSave also works through SMS text, the web and Instagram.

"We've armed people with tools that leverage natural instincts to [help them] save better," says Fremont-Smith. "It's such an unlevel playing field and [we] aren't aware of the cacophony of marketing that's targeted to us. ...The truth why [we] aren't saving is that our brain was designed to be good at hunting and gathering - not planning ahead. When we see fruit on a vine, we are hardwired to grab that fruit."

Though ImpulseSave may seem far out there to some, the company claims it's already saving users more than $3,000 annually. The company says that 40% of its users, a number not disclosed, maintain their savings after reaching their goals. As such, "there's an opportunity to introduce longer-term financial products," says Fremont-Smith, adding he's open to banks white labeling his technology. "We have been approached by many banks that perceive us as an interesting way to drive originations and core deposits [while] putting themselves on the customer's side."

ImpulseSave's efforts point to a larger trend evolving within financial services: new spend management and advice tools for mobile devices are quickly emerging that offer consumers actionable insights into their finances before they buy something.

Take Banno LLC (formerly T8 Webware), for example. The Iowa-based fintech company revamped its mobile app for banks, Grip, in September. The app ties location, upcoming bills, historical spending, and other data points together to help show the end-user how buying a sofa impacts his overall financial picture before he purchases the item. Grip includes a number of other actionable functionalities, such as a wish list feature that lets consumers set goals to achieve their desired purchases in the future. The company also wants consumers to use Grip as a resource for choosing which card to pay with.

"Banks need to explain how they save consumers money," says Wade Arnold, Banno's chief executive.

One driver: consumers rarely see the value of their checking accounts, say analysts. People don't perceive value in an overdraft fee of $35, but they might see merit in paying for a bank service that helped them make smarter spending decisions, says Ron Shevlin, senior analyst at Aite Group LLC.

"Banks like to talk about being relevant to customers," Shevlin says. "They need to help their [customers] manage their flow of expenses."

Whether consumers take their banks' advice - that's another story.

"Ultimately, it's the consumer's decision," Shevlin says.

The functionality isn't for everyone. "I don't spend money," says Shevlin. "I don't need a tool to make a smart decision."

But there are some segments were the tools would prove useful, particularly among the less affluent, where short-term budgetary concerns are much greater. Offering advanced budgeting tools would be a way for banks to reach the underbanked population, a segment banks have been trying to reach over the past few years.

Shevlin points to the people who live paycheck to paycheck, where discretionary expenses of $200 to $400 are a big deal, as a population that such tools would benefit. To become reality, though, Shevlin says many personal financial management [PFM] components, including offers available and budget forecasts, have to come together.

"There's so much more to personal finance management than creating pretty charts and graphs," Shevlin says. "I advocate that banks bring all [the pieces] into one cohesive platform."

 

REASONS TO SAVE

To date, PFM-esque plays delivered by banks through the mobile channel are largely in their infancy, with the exception of alerts. More readily available to bank customers today are ever-evolving online banking tools and programs that incentivize savings, even amid low interest rates.

Take U.S. Bancorp's S.T.A.R.T. program, for example.

S.T.A.R.T, a savings account that offers customers $50 Visa reward cards when they reach $1,000 and another $50 if they maintain the balance for a year, works when customers set up recurring transfers into their savings account. As of mid-September, S.T.A.R.T. boasted $3.4 billion in savings balances.

"There's a universal need to be in control of your money and create a nest egg," Karen Johanning, senior product manager, says. "Our rewards are meant to be a pat on the back. That's the impetus and remains the primary goal of S.T.A.R.T. You won't magically put [money] into your savings by accident. ...It has to be a deliberate choice."

The bank is in good company.

Meanwhile, Wells Fargo & Co. is readying a new estimating tool that aims to help online banking customers become more aware of their future finances. Indeed, the bank has been piloting a balance forecasting tool among its employees. The mission of the product is to offer users a 30-days-out view of their finances.

"It isn't perfect, but it's meant to help provide customers with insights into whether they'd have enough to pay their rent, for example," says Billy Robins, vice president, personal financial management, product management. "Wells Fargo has a long history of trying to help customers be successful in finance. ... People need help more now than ever. What can banks do to deliver solutions to help customers make better choices?"

Possibilities include better data visualization and projections of short-term cash flow, says Robins. "That's all exciting," he says. "Financial institutions can help customers."

Though the forecasting tool will only be open to online banking customers initially, Robins says, "there's a lot of opportunity to leverage the core functionality."

Mobile, for one, could eventually serve as a pillar for some of those opportunities.

"There's ultimately a lot of power on mobile," he says. "By leveraging the mobile phone, you can be more forward-looking and timely. ...Banks need to help customers with their planning and activities at transaction time."

ING Direct launched a new mobile app for its Canadian customers this summer that's meant to encourage them to save. That app, called Small Sacrifices, shows users how much money they'd save if they sacrificed small everyday expenses like coffee.

Startups have similar ideas.

The future of mobile financial services will address "how you provide insights to help users make better decisions without overwhelming them with analytics," says Steve Schultz, chief operating officer of Pageonce, a Palo Alto, Calif.-based mobile PFM and bill pay provider.

The U.S. Treasury, for one, is looking to help drive some of these innovations.

"Financial education 2.0 is what we are researching and encouraging here at the Treasury," says Melissa Koide, Deputy Assistant Secretary for the Office of Consumer Policy.

To that end, the Treasury announced in September its new finance data directory, which pulls together a variety of data sets from federal agencies available to the public. The mission of the directory is to serve as an accessible one-stop shop for those individuals building personal finance innovations. Currently, the directory is home to 50 different data sources.

"Research and anecdotes on the ground have been pointing to the value for consumers to be able to access tools that help them meet their immediate needs, set up their financial goals and assess themselves in how they are able to manage their finances," says Koide, adding that all such efforts come back to accessing their data.

"Our longer-term expectation or hope is that consumers are armed with information that's helping them make real-time decisions that are safe and responsive to their needs and goals," she says.

To help encourage mobile innovations, Treasury hosted a mobile app design contest this fall.

 

IS MOBILE RIGHT FOR PFM?

Some analysts, however, remain skeptical of robust PFM tools taking off through the mobile channel. Most PFM tools released so far have been designed for the web, which offers a larger screen and greater opportunity for visual elements such as the charts and graphs that are a centerpiece of most PFM sites. Mobile financial apps are generally considered to be more geared toward transactions and simpler queries.

"I am a big believer in PFM, but not driven by mobile," says Jacob Jegher, senior analyst with Celent, a member of the Oliver Wyman Group. "It will be driven by customized solutions released on online and tablet, with slices [ported] to mobile."

His skepticism is twofold: One, mobile phones aren't known as places where banking customers want to prolong their mobile banking visits. "They get in and get out," Jegher says. And two, online banking PFM tools haven't even taken off yet. "About 3.8% of online banking users are active users of PFM tools," Jegher says. "That's a horrifically low percentage." That figure was gleaned from 2011 research.

That said, Jegher says he views mobile alerts that are tied to location as a smart way to implement PFM-esque tools through the channel. Perhaps a grocery shopper had previously set up a budget of $500 for the category, he illustrates. In the future, perhaps he would receive an alert that he is nearing his pre-established budget threshold.

"I'm a big believer in tying banking and shopping [together]," says Jegher "I'm interested in things that solve needs. Everyone is interested in saving money and getting a good deal."

Still, there are privacy issues to consider and the market for such things is immature to date, he says.

Others agree. Though Mercantile Bank of Michigan's John Schulte would love to see mobile actionable alerts tied to a consumer's budget, the senior vice president and CIO says, "it's more of a dream at this point."

That's why entrepreneurs like Omar Green keep dreaming them up.

After wrapping up a career at Intuit in September, Green has begun to work toward making his own personal finance innovation vision into a reality through a company he's calling wallet.AI.

"We need to pull further forward in time," says Green, founder and chief executive of wallet.AI.

To that end, he wants to build a service that would let a user know when he should pass on buying a $3 coffee if he wants to meet his rent obligation and those "other small tiny decisions made every day" that add up. His longer-term vision would play out like this: A consumer waking up with a slight hangover would receive a set of messages from wallet.AI that would offer him options to the party hard overspending dilemma of the previous night such as opening a one-time overdraft protection from a bank.

Initially, Green says he plans to target wallet.AI to the underbanked, as that group primarily operates off of cash and makes risky or consequential financial decisions on a daily basis. "We believe it's possible to take a customer like that and turn him into a profitable customer" for the bank, he says. Ultimately, he views the service as beneficial to anyone.

"There is a gap around helping consumers make better decisions when they're out spending money," says Green.

He hopes to help.

 

 

BOTTOMLINE

Real-time budgeting tools promise to give consumers a brand new way to manage their money while shopping.