Red means stop! Banking app cuts customer spending
By David Henry
NEW YORK (Reuters) - Traffic lights don't just work for drivers, some bank customers obey them on their smartphones too.
A transaction-tracking app using red, yellow and green messages to warn account holders when they are paying out more or less than usual has resulted in some users spending less, a potentially powerful new weapon in the battle for customers.
Toronto-Dominion Bank (TD.TO: Quote) did not set out to change consumer habits when it offered its TD MySpend app in April. Canada’s second-largest bank just wanted to offer more information to customers who use their phones to check account balances.
But its ease of use has caught on. Customers don’t have to make up a budget to start using the app and it sends notices immediately with each purchase showing them whether they are spending more or less each month in categories such as dining out, entertainment and travel.
"The real-time nature encourages customers to change their behavior toward their financial goals," Rizwan Khalfan, chief digital officer at TD Bank, told Reuters in his first interview about customers using the app. "We were not expecting this."
About 750,000, or 20 percent, of TD's 3.5 million mobile banking customers in Canada have downloaded the TD MySpend app since April, Khalfan said. Of those, 30 percent were using it at least twice a month and, on average, reducing their spending by 4 percent to 8 percent.
Overall, that means about 6 percent of TD's mobile banking customers have been using TD MySpend and spending less.
Rizwan said the bank plans to put more marketing muscle behind the app as it learns how initial customers are using it. Continued...