The Money Revolution

Easy Ways to Manage Your Finances in a Digital World

Anne Boden

• Publisher: Kogan Page
• Year: 2019
• ISBN:
  9781789660630
• Edition: 1
• Topic: Personal Development
• Subtopic: Personal Finance

Transform the way you think about money in this easy-to-use, jargon-free guide by Anne Boden (CEO of Starling Bank) which busts commonly held financial myths, helping you to get the most of your cash in today's digital world. There's never been a shortage of advice on managing your money, clearing debt, being canny with your cash and getting the best deals. But it can be hard work, and everyone seems to be saying something different. What if you could easily cut through all the rhetoric and noise and everything could be made straightforward? In The Money Revolution, banking entrepreneur, and founder of award winning Starling Bank, Anne Boden shines a spotlight on how we save, spend and invest our money. By adopting a few new behaviours, it's possible to transform your bank balance for the better. The Money Revolution breaks through the traditional thinking about money and what you've always been told you should expect from financial institutions. Sharing the benefits of smart banking, fintech solutions and the advantages of open banking, it covers a range of financial solutions, from savings and investments to pensions, bill payments and travel money. Find out everything you need to know to get the best out of your money every day.

PART ONEa

Busting the money myths

1. 01 Take control of your money: you are in charge
2. 02 Be smart at building wealth: join the uberization of cash revolution
3. 03 Love your data: it’s the key to your financial health

CHAPTER ONE

Take control of your money

You are in charge

Transform the way you use money

Developments in smartphone and data sharing technology are transforming how we save, spend and invest our money. Our interactions with the world around us are now completely different thanks to sensors, cloud computing and WiFi, which surround us everywhere we go. With our every individual move noted and logged, it has become possible for us to be charged only for the actual time that we use particular services. To the second. Forget about dull, predictable monthly bills that have to be paid regardless of how much or how little you use a service: pay-as-you-go is set to become the new norm.

This book is a guide to some of the latest products and services that can and will transform the way you view and use your money. Thanks to a wave of new banking, savings, investment and pension apps it is now possible to understand more about your money and take control of it in a way you have simply never been able to do in the past. And don’t worry, you don’t have to be a tech genius or a money markets expert to understand it all. That’s the point. Most of the time all you will need is a smartphone and the will to make your cash work a bit harder for you.

You can, if you like, think of it as outwitting the established global finance industry that has previously thrived on the status quo where no one really understood what was happening with their hard-earned cash. This book will show you the most up-to-date financial tools available and how they simplify what happens with money, creating a more even playing field. I can even show you how to make money out of your banks, instead of them always making money from you. Yes, we are talking about the complete reinvention of the inefficient, over compensated, financial business model.

It’s not that any reasonable person begrudges banks and financial institutions making money. They are, after all, businesses, and if they don’t make money, they wouldn’t be able to survive. No, it is the sheer amount of cash that many of the big firms make from their customers that has made many ordinary people baulk. Worse still, no one is ever really sure how they do it. In the past, finance has been one of the least transparent services available, and you’d be forgiven for thinking that this is just how some of the large institutions like it. You don’t need to scratch too far below the surface to find a breath-taking range of ways that they eat into your hard-earned cash. Free bank account? Not really. They make up the shortfall with inflated charges on interest and unauthorized overdrafts. Great loan deal? Maybe, but how much did you pay in fees? Going abroad? Check your statement when you get home because all those trips to international ATMs add up in ways you’d never have anticipated.

The problem is, unless you are the type of person who always watches your bank balances, insurance premiums and pension contributions like a hawk and are on top of every single transaction, it’s not that easy to work out where it all goes. Payments are not always transparent, and fees on transactions are either hugely complex or neatly hidden away. Even if you are especially careful, there has frequently been no real way of getting to the bottom of what you are paying for in a service. It doesn’t help that the smoke and mirror show around our cash is built on a foundation of myths about our money and what happens to it. These myths promote ‘truths’ such as that banks can always be trusted to have your best interests at heart, or that independent advisers are truly independent, even though these beliefs have been disproved time and again (often in the most dramatic and ruinous ways). Meanwhile, glossy ads for any sort of financial services organization declare their customer friendly credentials, yet it has often been difficult to get any sort of coherent explanation about the products they back. Any information dispensed by the institutions that are supposedly championing our financial cause frequently feels very hard to come by too. Even so, the myths prevail and have helped to keep many people in the dark about their finances ever since they became adults and started earning a wage. The persistence of these uncertainties frequently makes anything to do with saving, spending and investing feel like a leap in the dark.

No one needs to put up with this confusion over money today. Banking, and indeed anything to do with managing our finances, has been undergoing a radical makeover. In fact, it would not be overstating it to say we’re going through the biggest and most rapid shift in our relationship with money for hundreds of years. Perhaps ever. It’s a money revolution. Thanks to advances in technology, from machine learning, to artificial intelligence (AI), to robo-advising, there are widespread opportunities to not just understand more about where your money is going but also to take complete charge of it and make it work better for you.

Why this book now?

My credentials for writing this book are born out of working in banking and finance for my whole career. I have worked on both ‘sides’: initially within so-called traditional banks where the model has barely changed for decades. I now head one of the most successful of the new breed of highly entrepreneurial fintechs (an abbreviation of financial and technology) that have turned on its head the way we think about and use money.

My first job was as a graduate trainee at Lloyds Bank, and I worked my way up through executive positions at Standard Chartered Bank and UBS before moving to head global transaction banking across 34 countries for ABN Amro and RBS. My final position, before I decided it was time to do things differently, was as chief operating officer of Allied Irish Bank (AIB). I was headhunted there with a brief to turn around the then debt-ridden bank that had been taken over by the Irish government in the wake of the global financial crisis that hit in 2007–08. Although the Irish bank was returned to profitability, the experience had a big impact on me. Radically cutting costs while tens of thousands of Irish citizens suffered the ongoing effects of the financial crisis made me question whether we were approaching things in the right way at all. It became glaringly obvious that there was something very wrong with existing banking practices. While everyone else in my sector was desperately trying to reinstate the exact same model of the established business of finance that had been ripped apart by the global credit crunch and subsequent government bailouts, it was all underpinned by cumbersome, legacy systems and inbuilt bureaucracy that had arguably contributed to the problem in the first place. Surely this was the very time we should all be doing some soul searching and looking at doing things an entirely different way? With no one else in my industry seemingly interested or willing to do this, I decided to take on the task myself.

After taking some time out to analyse the way financial systems worked, which was a process that took me around the world on a fact-finding mission, I formed a vision for a new digital bank that would use the latest technology to genuinely put the customer first and give them ever greater choice. My new bank would have no physical branches because it would operate from the smartphones we all have with us all day, every day, making my money services accessible 24/7. The philosophy of this service would not be predicated on a mission to sell customers products. It would be a service that looked after customers and catered to their needs, rather than the other way around. As I developed my idea, I realized I was at the beginning of an opportunity to fundamentally change our relationship with finances, just as Amazon had changed shopping and iTunes had changed music.

Starling, the mobile bank I created in 2014, has gone on to become one of modern banking’s biggest success stories, winning multiple awards and, of course, hundreds of thousands of new customers. After starting life as the UK’s first mobile-only current account, Starling now offers business accounts, joint accounts and a marketplace offering a range of partnerships with complementary financial partners from mortgage brokers to pensions providers. Each of the partners is carefully checked to ensure it matches the bank’s philosophy of being accessible, transparent and easy to use. Most importantly, it has to put the customer in charge of their own finances.

The challenge of traditional banks

One of the things I have most enjoyed about working with developers that I have met through our marketplace and the fintech community, is the ‘can do’ attitude that I frequently encounter. In my previous life, working for bricks-and-mortar banks, the tendency was to accept things as they were because it had always been done that way. Often, even if there was an inkling that it could be done better or in a more convenient way for customers, no one did anything because someone, somewhere said it couldn’t be done. Discussion closed.

One of my most memorable examples of this occurred when I was at AIB. As well as working on rebuilding trust with our fed-up customer base, the bank was keen to build up its current account business, which meant attracting new customers. It seemed to me that the most obvious pinch point to tackle in this objective was the lengthy (and extremely off-putting) processes that needed to be ticked off before an account was declared open and a customer received their debit cards. ‘It needs to be vastly simplified,’ I said.

In my view it was no wonder that people would doggedly stick with their chosen bank for an average of 17 years, a feat of apparent extreme loyalty that even surpasses that displayed in most British marriages that last on average just 11 years and 6 months. At that time, it wasn’t as if any of the other high street banks were even offering a fantastic, top notch service that made it almost impossible to leave for pastures new. In fact, frequently quite the opposite was true. Most banks offered more or less identical products and services. It was easy to assume that no one wanted to change out of sheer lethargy, but it was equally likely that even if they were entirely fed up with their existing bank, they were put off switching by the complex and slow application process. (At that time there was also an element of concern over the potential risk of direct debits or crucial payments going astray, but that was resolved when the automatic transfer of incoming and outgoing payments when switching bank was introduced in the UK in September 2013.)

The reaction to my proposal to speed things up with a vastly simplified account opening process was instant. ‘That’s not going to happen,’ I was told by a senior colleague.

Of course, I pressed the issue. I needed to know why customers needed to jump through multiple hoops to open an account. The basis for any new business drive is surely to make one proposition vastly more attractive than another. The only way I could convince you to change your bank would be to make it as quick and painless as possible, right?

The more I pushed, the more reasons I found it couldn’t be done. It was due to ‘compliance’ or ‘central bank rules’, or any number of other reasons that didn’t seem to make sense. Determined to get to the bottom of it, I delved into the answers I’d been given, trying to discover which rule was actually correct. With so many differing reasons, one had to be right. It was simply a question of finding it, and then I could work out if there was a way to get it changed or certainly to request it was made more appropriate to current practices. Do you know what? Many of the rules I had been quoted didn’t exist at all. My banking colleagues were all hugely bright people, but a lot of what they believed was what they had been told by their predecessors. It was the worst case of Chinese whispers I had ever come across. Statements had been passed down through generation after generation of bankers with not one question asked because it was ‘the rule you had to follow’. Meanwhile, you, the customer, shrugged your shoulders and stuck with what you had, because (a) the alternative was just the same, and (b) changing was a pointless hassle.

Challenging the myths of traditional finance

My awakening to the mythology around account-opening prompted me to start to look into all the other ‘certainties’ in banking and finances. The stuff we all accepted because it was forever thus. Was it possible we were all bumping along believing one thing, when nothing could be further from the case? I wondered just how many things we were tacitly accepting as they wer...

Table of contents

• Acknowledgements
• Introduction
• Part One Busting the money myths
• 1 Take control of your money: you are in charge
• 2 Be smart at building wealth: join the uberization of cash revolution
• 3 Love your data: it’s the key to your financial health
• Part Two Fintech money makeover
• 4 Check your credit score
• 5 Make money every time you shop
• 6 Maximize savings and investments
• 7 Pay-as-you-go insurance
• 8 Pay off your mortgage
• 9 Give generously
• 10 Bill management made easy
• 11 Saving for retirement: the low stress way
• 12 Invest like a pro
• 13 Travel cash best deals
• 14 Borrow clever
• Afterword
• Index