Gutsy personal finance application

Every now and then a service comes along, which I can’t really get my head around. Not that I don’t get what they are trying to do. But more that I’m not sure whether it’s a great idea or not.

Strands, a recommendation and lifestreaming service, is launching a service for Spanish bank BBVA, which basically brings recommendations to the personal finances of that banks customers. A gutsy move. But also one with pitfalls.

Let’s look at the gutsy part first. It seems tremendoulsy cool that you can now keep a closer track on your spending, and how you compare to other people, who may seem like you based on demographics. It allows you to be allerted to any significant differences, think about these and perhaps even act on them. It’s a great alternative towards spending hours trying to get the same kind of insights from fx an online banking application.

Now for the pitfalls. Because there is more than one.

The first pitfall is the question, whether you want your personal finances information to be shared with others. Of course its completely randomized, and as such you could just sit back and not care. But it’s nevertheless something, I think you should have your eye on.

The second pitfall is following the herd. Do you necessarily want to manage your finances the way other people do? Lets for arguments sake suggest that it becomes popular to take high risk loans to finance purchasing high risk stocks in high risk markets. I can’t think of much that would involve a bigger financial risk, but would you do it, if everybody else (or at the very least the majority) were doing it? I certainly wouldn’t.

The final pitfall is perhaps the most serious one: Don’t forget that a bank exists to make money. It’s a great rule of thumb that an adviser in personal finance is first and foremost a sales guy. The more banking products he or she can get you to sign up for, the bigger the paycheck. A tool such as the one from Strand could be an obvious catalyst for that sort of behaviour, with the bank/system pretty much always advising you to make changes - changes that cost money in fees etc.

All in all I like the idea of such a service as a concept. But I do think that there are some real issues around practicality and ethics that needs to be investigated.

(Via ReadWriteWeb)

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