Money
Which apps should you use to track your expenses?
Summary
Some apps want access to SMSes and emails, others use the account aggregator system
Do you remember the first time that you bought an expensive pen? How much did that cost you? Many people do not have that sort of information on their fingertips. Some do have a personal organizer or a diary to record such transactions. Kuber Bathla, a research associate, does exactly that. He learnt the art of expense tracking from his father, who has kept a record of every transaction since 1991. Bathla said his father, a 56-year-old farmer, could tell him how much he paid for a costume that he wore for his annual school function in 2011. “He opened his diary and gave me the exact figure," said Bathla. “ ₹600."
When Bathla started earning in 2020, he felt the need to discipline his spending habits like his father. So, he opened an account with Notion (a note taking app). At the end of each day, he would painstakingly key in his spends in separate categories that he created. This lasted for about four months till he felt the need for a simpler process.
Bathla told Mint that he started searching for apps that could automate this process. He soon found some apps and figured two ways to keep track of expenses. One was by giving the apps access to your SMSes (phone messages), and emails. The second was to give access to your data through the account aggregator (AA) system.
Many people feel uncomfortable giving a third party access to their personal SMSes/emails, as did Bathla. He thought giving access to his financial data through the AA system which is regulated by the Reserve Bank of India (RBI) would be more secure. He downloaded the Jupiter app that relied on the AA system to track all his expenses.
Jupiter would also automatically categorize his spends. The app leverages intelligence developed in-house to figure out what each transaction was used for: food, travel, shopping, or paying monthly rent. But after a few weeks of using it, Bathla realized this system had its own limitations (see graphic).
The SMS/emails route
Patanjali Somayaji, chief technology Officer at axio (formerly Walnut), explains how the SMS expense tracking system works. For instance, he told Mint, let’s assume a user buys petrol from a BPCL pump. The user’s bank will send an SMS confirming the payment (debit) and the axio app gets to know the merchant details. If the app is given location access, it can even map the spend accurately to the suitable expense category.
This is one example of how location access can improve expense tracking. Apps develop their own proprietary framework to map transactions into categories. The success of a tracker app depends on how accurately the systems can categorize the transactions. To be sure, if the spend is entered in the wrong category, users can change it themselves.
Many financial experts said that giving access to personal SMS and email through personal finance management apps is risky as there is no way to track if your data is misused.
“If you give access to your SMS and email data, they are not just reading your transactions but also all your other messages," said Aayush Chahabra, founder of Kniru, an expense tracking app, which is waiting for regulatory approval to use the AA system.
There are other challenges too. Apple products don’t allow apps to access SMSes and emails. Some users have more than one phone and receive transaction details on two separate devices. Some users delete their SMSes and, at times, they don’t get any notification of the transactions. Moreover, data on mutual funds, insurance, and national pension scheme (NPS) cannot be accurately traced through SMSes.
AA tracking
In AA, financial data is transferred through a secure network regulated by RBI. Here’s how it works: Banks, asset management, registrar and transfer agents (RTAs), depositories, and insurance companies, collectively known as financial information providers (FIPs) provide data to entities regulated by RBI, Sebi, Irda, and PFRDA, known as financial information users (FIUs). The data transfer happens through the account aggregators (AA).
Chhabra said that apps using AA will ask users for their phone numbers when they register. Then the app will approach AA for the data. The AA will send an OTP to the user’s phone number, and the user has to authenticate that in the app. The company will use the same OTP to verify the account with AA. This is assuming the phone number is linked with your pan card.
But there are issues with this system too. For one, credit card transactions are not part of the AA system currently. The only data that is provided is when you repay your pending credit card bills. “I used my credit card last month, but I paid the bill this month, The app, though, will categorize last month’s spending in this month which is not accurate," said Bathla.
According to Fold Money, some banks are not sharing transaction timestamps properly. “If we don’t have the visibility of when users have to repay a loan because the timestamp is missing, then the users might miss the due date," said Akash Nimare, CEO of Fold Money. “This might appear to be a minor issue, but for an end-user, it can be misleading and confusing."
The National Payments Corporation of India mandates banks to share transaction details in a certain format, but that is not happening properly and apps are unable to make sense of the transactions. “Every bank follows its own narration," said Nimare, Also, some banks delay sharing data while others may not be using the AA system.
How do they make money?
Spending trackers need to pay AAs to access data. Tejinder Singh, chief business officer of CAMSFinserv, which has a AA licence, said these apps require data frequently and this results in higher costs on a per-user basis. Apps using SMS/email tracking also incur costs that need to be recovered. There are also costs associated with developing and maintaining their software.
There are two ways to earn for these apps: to charge a subscription fee directly or sell products through the app. Fold Money said that it will sell a premium version of the tracker through a subscription model. The premium plan will include features like the option to add more bank accounts and categories, get data updates more frequently, enable your chartered accountant to view your profile, etc. Fold money is in the beta stage now.
On the other hand, apps like Jupiter and axio provide their expense tracker for free to keep users loyal to the app. They don’t earn directly from the expense tracker but sell other products on their app.
Gupta of Jupiter said they analyse user data through the expense tracker app and pitch them personalized investment products.
On the other hand, axio is a registered NBFC and offers its own products: Buy now pay later (BNPL) and personal loans. The firm uses the expense tracker as just an engagement tool and derives most customers from third-party integrations. However, Jatin Bhasin, chief product officer of axio, said that if the user grants access to their expense tracker data, then the user may be approved for larger loans or lower interest rate loans.
Meanwhile, Bathla has gone back to using excel to manually track his expenses. He said the only way to accurately track your expenses is to do it yourself. Apps currently have too many flaws.
