Will open banking and budget apps improve client spending management?

If people knew where they were spending their money, they’d change their habits, right? I can see why people make that assumption. But we’ve had budgeting apps for decades, with no such result.

The fundamental problem of people spending more than they make has yet to be solved, despite all those digital money management tools reporting where it all went — four reasons.

1. Canada doesn’t have open banking

Open banking is not a thing here in Canada just yet. It’s expected by early 2026, but it’s been promised since the 2018 federal budget. As of today, some institutions have given the aggregators direct access to their data via application programming interfaces. But many still access the data by extracting what’s visible on the screen (i.e., screen scraping) when an accountholder gives them permission to connect to their accounts online.

Without open banking, using some of these tools may violate a person’s cardholder agreement and jeopardize the security of their accounts. This method of data access can be unreliable too, because expenses can be misclassified with the slightest changes to online banking user interfaces. And these tools can disconnect; just ask any business owner using this type of feature with their accounting software.

Your clients may not necessarily have to wait for open banking to get insights into their own data. That’s because plenty of banks are coding similar features right into online banking. While this could eliminate the security risks, the question remains: does seeing transaction patterns make people spend less?

2. Many people don’t want to use these apps

Even when open banking is official, that doesn’t mean Canadians will jump right in. MX Technologies’ latest report, Are Financial Apps Falling Short?, found that 24% of people are using spreadsheets to track their finances, up four points from last year. You might expect people to be over spreadsheets by now, but that’s not entirely true.

Among those who preferred a manual process like spreadsheets, 65% said it’s because they’re easier to understand.

The report also indicated that respondents use other methods of managing their finances besides spreadsheets, including checking financial accounts (35%) and using a budgeting tool or app (19%). Meanwhile, 14% said they don’t track their finances at all.

Of people who were tracking their finances, budgeting apps were the least likely thing they would use.

3. Budgeting apps are best at categorizing expenses by retailer

While there’s been progress with aggregating bank data, most of it has revolved around retail information. But the automatic categorization of bills, mortgage payments and investment contributions — if an app even offers it — can be unreliable.

For cash-flow planning, users need that data. If these tools could organize that quickly, it would be a game changer.

But these apps rely on the hope that the user’s awareness of their retail spending is enough. Telling someone how much they spent on fast food last month may not create a meaningful change in habits.

Yes, some tools are effective at organizing retail transaction data. But they don’t use receipt-level data. They generally use the retailer’s name to decide which expense category to put the item into.

Let’s say your client buys a patio set or a Bluetooth speaker at the grocery store. These apps will assume that purchase was food, making the insight misleading.

4. Knowing what you did, and what to do next are different things

MX Technologies also reported that 65% of people feel that financial institutions providing access to these apps must provide more actionable and clear insights so the end user will have an idea of how to use what they see. Seeing their transactions by retail category, like dining or grocery, may show some trends. But it’s not necessarily clear what to change. And using alerts to notify them if a transaction is outside of their typical spending could be helpful, but if that alert induces guilt, the most likely behaviour it will induce is turning the alert off.

None of those features necessarily tell the user what their ideal next action could be. It’s going to take more than an alert telling someone they’re over their coffee limit, especially after they’ve drank one, to create meaningful change.

The U.K. is considered the world leader in open banking. But a study produced by the Money & Pensions Service showed that while access to one’s own financial data caused people to say they were more confident about their finances, they found no significant results in saving, budgeting or indebtedness.

A more recent study by tink (a Visa Solution) showed that the average Brit using digital financial management tools was better off, to the tune of £37.08 per month. That’s better than nothing, but not enough to help consumers pay down debt or save for retirement.

This is not surprising. Fintech advocates tend to think that better technology with fancier features is key. But telling someone how much they spent on sushi or yoga pants will not create meaningful financial change.

Advisors can help

Tracking spending has limited results, manual or otherwise. Anything that requires a lot of conscious effort to do will wear most people down after a while.

Tools that don’t give users clear suggestions on what to change won’t produce results. Clients, and the financial professionals who advise them, are better off using existing systems, like bank accounts with specific purposes and automated savings. Show them how much it is safe to spend on the things they can control.