(Repeats story with no changes to text)
By David Henry
NEW YORK Dec 11 Traffic lights don't just work
for drivers, some bank customers obey them on their smartphones
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 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
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.
See how TD Bank in Canada pitches its app here (go.td.com/1XEIKyy)
It is too early to know, Rizwan said, whether TD MySpend
could improve TD's ability to hold onto deposits, a key
consideration as interest rates rise and banks compete more
aggressively for customers.
Consumer deposits are a relatively stable source of funds
for lending, which is more important in light of new global
regulations. They tend to be cheaper than deposits from
businesses, especially when interest rates rise.
The success of new apps is also vital to bankers who fear
technology companies will offer better tools to win customers
and snag more of the fees and marketing information that come
with handling payments.
For decades, financial advisers, self-help authors and
software firms have come up with systems to help spendthrifts
budget and save money, only to see the vast majority drop them
like New Year gym memberships.
Whether using separate envelopes of cash to limit spending
by category, or installing programs on personal computers, the
rule of thumb is that only about five to 10 percent of people
are determined enough to stick with a plan, said Greg Midtbo,
chief revenue officer at Moven, the financial technology company
that developed and licensed MySpend to TD Bank.
One big hurdle facing spending apps is their inability to
safely and quickly pull together data from accounts at different
institutions at the same time.
TD MySpend combines spending from different deposit and
credit card accounts only at TD Bank. Khalfan said the bank is
considering how it might safely bring transaction details from
accounts outside of TD into the app. Doing so would require
contracts and technical agreements with rival banks.
JPMorgan Chase & Co and others in the industry have
complained that customers increase the risk of cyber theft when
they give account passwords to outside firms.
There are moves to collaborate on a solution. In October,
the Center for Financial Services Innovation, which is funded by
U.S. banks and foundations, issued principles for sharing
The Moven app underlying TD MySpend was not immediately a
success. Moven initially offered the app directly to consumers
but too few people were willing to connect it to their accounts,
so the company decided to provide the technology through banks
Since turning on TD MySpend in April, Moven started an app
in September called CashNav for the New Zealand branch of
Australia's Westpac Banking Corp.
So far, 20 percent of Westpac New Zealand mobile banking
customers have downloaded the app, a spokeswoman said, adding
that about three quarters of those people said it is helping
them control their spending.
BBVA, Spain's second-largest bank and owner of
consumer franchises in the Americas, picked up a similar app,
and experience in the field, with its 2014 acquisition of
financial technology startup Simple, which still markets itself
directly to the public.
BBVA's Compass bank in the United States plans to introduce
its own app to track spending next year, said Alex Carriles, its
executive director of mobile and online banking. BBVA banks in
other countries are on similar paths, said Jose Olalla, head of
business development for BBVA Compass.
The tools, Olalla said, build loyalty with customers. "The
sense of control is the benefit they are getting," he said.
Despite the urge to spend, many people would be better off
with more control over their discretionary spending. A survey by
the U.S. Federal Reserve found 46 percent of adults said they
could not cover a $400 emergency expense without selling
something or borrowing money.
While some of those do not make enough money to have
emergency cash, even people with means have trouble keeping
their spending on an even keel. The so-called payday effect, in
which people spend more after receiving a surge of money, occurs
across income groups, according to an April 2016 study by
scholars at the Columbia Business School and Copenhagen Business
"The swings weigh on people emotionally," said Josh Reich,
chief executive and co-founder of BBVA's Simple.
"It shoots people's confidence when one day they are feeling
rich and two weeks later they are feeling poor."
Instead of showing people only the ups and downs of their
balances, better to let them see their spending trends and they
will temper impulse spending, Reich said.
"If you give people the tools to feel in control, they will
(Editing by Carmel Crimmins and Bill Rigby)