What’s this all about?
Shadow financial behaviour is a trend whereby traditional financial institutions, more often than not, are unaware that they are sharing customers with fintechs and so, a chunk of the customers’ financial habits is not being tracked. As the Irish market looks set for significant change in the coming years, there are questions as to the role fintech will play. In the following article, we carry out an analysis of the apps currently available across financial services to get an idea of the extent of customers’ shadow financial lives and what it means for the future of banking in Ireland.
Read on if you:
- Want more information on the concept of ‘shadow financial lives’
- Are keen to get an insight into the financial services apps available in the Irish market
- Want to understand the lay of the land in Irish banking and how it might change
In early 2021, Cornerstone Advisors released a report on how US consumers are leading shadow financial lives by using mobile finance apps other than those of their bank. Despite how it sounds, the term ‘shadow financial lives’ does not imply that what customers are doing is illegal, but rather describes how their financial habits are not being monitored by the legacy financial institutions with whom they have accounts.
According to the research, those who are in the shadows have an average annual income of $75,000, while non-shadow consumers have an average annual income of $60,000. The report’s assessment finds that shadow financial behaviour is having a positive impact and that while banks might be familiar with the rate of fintech adoption, more often than not, they don’t realise that they are sharing customers with fintechs.
According to EY’s Global Fintech Adoption Index from 2019, amongst the digitally active population in the Irish market, 71 per cent have adopted fintech services. More recent data suggests that during the pandemic, we have vaulted five years forward in consumer and business digital adoption in a matter of around eight weeks. With changes afoot in the Irish market, there are questions around what role consumer fintech might play. Indeed, members of the Electronic Money Association (which includes Stripe, PayPal, Amex, Facebook Payments, Revolut and Google Payments) have submitted an objection to the competition commission in Ireland against the legacy banks’ joint venture, Synch Payments, to set up an instant payments app. Meanwhile, news reports suggest that N26 may have plans to exploit the departure of Ulster Bank and KBC from the Irish market and introduce new credit, loan and overdrafts products.
With all this in mind, it’s worth delving into the market to uncover what mobile financial services Irish consumers are using to understand the extent of the shadow financial lives they lead.
The landscape at a glance
There is a wide range of different apps across financial services in Ireland. We have whittled this back to a selection of just under 60. The graphic below provides a snapshot.
The landscape up close
While Revolut and N26 offer banking services, we have excluded them from the banking category based on the fact that they don’t offer lending services – for now.
In a previous article, we judged KBC to have the best mobile banking experience followed by AIB and Bank of Ireland. So it seems like the two biggest banks in the country have fairly decent mobile banking experiences, though it must be said, that some in-app lending offerings by these banks exclude mortgages and, as we’ve written elsewhere, the emergence of a modernised home-buying ecosystem in Ireland is all but inevitable. Could N26 take the crown?
Irish consumers have a couple of options when it comes to app-based trading. DEGIRO offers access to the global financial markets and the potential to invest in shares, ETFs, futures, bonds and options. Trading fees are low and there is no minimum deposit. But a lack of educational and research tools as well as no forex trading loses DEGIRO points with reviewers. Passfolio is another low-fee option, but customers are limited to the US markets.
Irish consumers can also trade on eToro, commission-free. A stand-out feature is social trading, which allows its users to observe the trading behaviour of others. But some reviewers note that because accounts are only offered in US dollars, conversion costs can stack up.
Saxo Bank is another option for Irish customers, noted for its well-designed trading platform and forex trading. It does charge fees but they are average overall and considered by reviewers to be a trade-off for high-quality service.
There are a growing number of cryptocurrency and blockchain apps. Indeed, last year, crypto apps saw record growth. Coinbase has grown to become the largest crypto exchange in the US and listed on the Nasdaq earlier in 2021. Irish users can buy and sell cryptocurrencies including Bitcoin, Ethereum and Litecoin. There are no fees to use the app but Coinbase does charge a variety of other charges.
Binance, the largest cryptocurrency exchange by trading volume, launched its debit card in Ireland last year. As well as Bitcoin, Binance supports over 500 digital currencies as well as their own Binance Coin (BNP). Binance offers notably low trading fees – even lower if BNP is used. However, Binance is not as suitable for beginners as Coinbase. EXMO and Bitpanda also offer services for Irish customers with the former noted for its 24/7 customer support and the latter for its low fees.
Screens from the LEVERIS white-label mobile app with banking, lending, FX, investment and money management functionality.
Bill-splitting apps like Splitwise and Settle Up have been designed with Generation Rent in mind. Splitwise was originally designed as a way for roommates and couples to share bills and household expenses, and now offers a one-stop-shop for shared expenses. According to reports, Splitwise experienced dramatic increases in household cost-sharing during the pandemic. As of April 2021, a figure of over $90 billion in total transactions had been split on their platform. Some reviewers note that the app doesn’t handle any money itself though and so, users don’t know when they’ve been paid.
Settle Up also allows you to split bills and keep track of expenses. It is ad-supported but there is a Premium version at a monthly cost of €0.99 or €8.49 a year.
Apps in this area of financial services take advantage of regulations like PSD2 and Open Banking. Fast-growing money management and savings app, Plum, launched in the Irish market last November and allows users to connect bank accounts from Bank of Ireland, AIB, PTSB, Ulster Bank and Revolut. Using AI to analyse your transactions and adapt to your spending, small amounts of money are transferred automatically.
Some reviews note that with the fees a number of current accounts with traditional institutions charge at the moment, frequent microtransactions can get quite costly. The only supported bank that doesn’t charge these fees is Revolut, which has a similar roundup/savings vault function in its own app. However, Bank of Ireland has scrapped transactional fees in favour of a flat monthly fee from December 2020 so this could change things for some Plum users. Plum also plans to launch both interest and investments in the first half of 2021. The Olivia app is another option which also uses AI to help users save.
Apps like YNAB (You Need A Budget) focus on budgeting. YNAB uses a four-rule approach to implement a zero-based budgeting system. Essentially, each unit of money is accounted for in order to help users get out of a cycle of living from paycheck to paycheck. The app is free for 30 days, then there’s an annual subscription of €85.99. This is fairly pricey as subscriptions go but many reviewers argue that the app saves more than it costs.
Irish consumers have a wealth of options in the payments space. As mentioned, the only thing Revolut doesn’t offer is loans – a service that N26 looks set to introduce. Indeed, Revolut seems to take the biscuit for many Irish reviewers, offering, as it does, payments, FX, trading, savings, budgeting, bill-splitting and the ability to buy cryptocurrencies – all without the need to switch apps.
PayPal is another secure option for users to send payments but offers no bill-splitting features and debit card transactions incur a fee.
As for FX, Wise, formerly TransferWise, allows customers to hold money in 55 currencies and receive payments in ten currencies. The rebrand signals Wise’s intentions to offer broader banking services down the line. Reviewers like Wise for its efficiency, transparency and low prices. Meanwhile, CurrencyFair offers another alternative for Irish customers to send money overseas and exchange their currencies. Reviewers love the app for the convenience of keeping track of expenses and for the competitive rates.
Although Irish consumers have decent, but limited, options in terms of banking apps, there are a number of other services available through app stores, offering attractive rates for FX, instant payments, access to the markets, cryptocurrencies and features that help them manage their finances.
There are of course two key questions: where are all the lending apps? And which kind of firm will emerge with a competitive, all-in-one offering? Revolut, with 1.2 million Irish customers, seems to come close, but N26, with 200,000 customers, is making the most noises as to its ambitions in the lending space. The joint venture by Irish banks, Synch, looks set to focus on payments once it launches. Meanwhile, internationally, there is much talk of PayPal being the first company in the Western World to crack the super-app.
For now, there aren’t a huge amount of options available for those who wish to apply for a loan or a mortgage in-app. So, with B2B fintechs behind the scenes continuing to improve infrastructure solutions, the race is well and truly on.