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WSJ Your Money Briefing
The Hidden Dangers of Automatic-Payment Apps
00:08:24
For younger people, automatic-payment apps have severed the connection between the things we buy and the act of paying for those things. The Wall Street Journal's Kevin McAllister explains how to get that connection back.
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- [00:01]
A
Deal replaces fragmented Payroll vendors with one global system. No third parties, hire, manage and pay teams in 150 plus countries. Operate like a local everywhere. Visit d e l.com WSJ. With your money briefing. I'm Tanya Bustos in the newsroom at the Wall Street Journal. Coming up, we're taking a look at the hidden dangers of automatic payment apps. But first, here are some money Headline the FHA is clamping down on risky government backed mortgages the federal agency that insures mortgages for first time buyers is tightening its standards. Concerned it is allowing too many risky loans to be extended, the Federal Housing Administration told lenders it will begin flagging more loans as high risk. Those mortgages will now go through a more rigorous manual underwriting process. The FHA's decision to tighten underwriting could mean fewer first time home buyers are able to get mortgages. Roughly 40 to 50,000 loans a year likely would be affected, or about 4 to 5% of the FHA's insured mortgages ride Hailing company Lyft is leading a parade of Silicon Valley companies to Wall street that display an unusual quality lots of red ink. The latest Journal reporting writes that with its initial public offering expected this week, Lyft will serve as one of the biggest tests of the public market's appetite for money losing companies. Of the five companies with the largest losses before an ipo, four of them Groupon, Moderna, Snap and Vonage, have performed poorly on the public markets. A fif Viasystems group went private a year ago at a fraction of its IPO value. And, according to the Journal, for investors betting on the coming IPOs, the main appeal is rapid growth, which Lyft has made a centerpiece of its push to Wall Street. And Venmo has a message for its users, if you owe us money, we're coming for it. The digital transfer service operated by PayPal holdings is ratcheting up pressure on users the company says owe it money for transactions that went awry. In a bid to curb losses on its platform, Venmo is threatening to sic debt collectors on some users who carry negative balances in their accounts. Venmo also recently amended its user agreement to give itself the power to recover money its customers owe by seizing it from their other accounts at PayPal. Journal writes that PayPal's difficulties in trying to turn Venmo into a moneymaker show how banks and financial tech companies are having a hard time making finance faster and more convenient for customers while also earning a profit. Coming up, automatic payment apps and the hidden dangers within them. Automatic payment apps certainly make things easy, but in doing so, are we ignoring some very important things we need to know? Here to inform us on what we need to know in the new digital landscape is Wall street journal reporter Kevin McAllister. Welcome back.
- [03:03]
B
Thank you so much.
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A
So, Kevin, in tackling how younger people are navigating through the world of finance, I mean, it's pretty much all digital. As with anything these days, everything's automated. And you brought up something really interesting with the concept of control and what this means about how much we're really controlling our money and whether apps and automation have taken away some of that control. Are we in control of our money or really interesting thing to think about as we continue to use tech to pay for things.
- [03:34]
B
Well, yeah, and I think that that'. Exactly the observation that I was trying to make is that there's a real difference and a disconnect between the tools that give us so much hands on experience with our money and the way that it used to be as well, and figuring out why people feel less in touch with their money than they may have in previous generations or previously.
- [03:59]
A
That's one thing you want to feel in control of. If there's one thing you want to be in control of, it's with your money. Right. And yet we've sort of sacrificed it to tech in a way because it is so easy.
- [04:10]
B
Yeah. And what I was trying to get at is that not caring too much about every single transaction that you make is really a luxury. And it's the source of a lot of anxiety. And in the past, people have had to deal with that in multiple different steps. Either at the cash register, when they get a bill, in the mail, when they write a check to actually pay that. What we've been able to do is automate that financial anxiety away, which is a real luxury. But in that same capacity, we have set ourselves up for a system that doesn't have the same financial literacy safety net that we may have seen before.
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A
So what does that open the door to? You know, you talk about the hidden dangers. So what are we not thinking about as such?
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B
Well, I think it', sit's, you know, as with anything figuring out whether or not you can afford something, figuring out whether or not the money would be better spent or allocated in some other way. And it's very easy now to swipe a credit card to forget about the purchase and then move on. And you don't have to confront your spending if you don't want to. Like I said before, it's a real luxury. It's something that only a certain subset of people previously had, and now it's really been made available to everyone because of things like autopay and things like bill pay systems that most people I know have set up.
- [05:34]
A
And I think another thing a lot of people can relate to is the muscle memory that goes with having to do all of the things that we once had to do and what that works like, not unlike when we used to have to remember phone numbers. In not nurturing that financial muscle, you know, are we becoming less financially fit? Are we more inclined to just stay less on top of things in general?
- [05:56]
B
Yeah, well, that's what one of the financial professionals that I talked to had warned about and said, you know, smart spending and being smart with your money is a muscle like anything else. And when you don't use it, when you don't really think about everything that you're doing, you risk having that atrophy. And so I think that that muscle memory that used to happen, where you would be sitting down, taking actual time, doing a physical thing, that marked spending was really good in the connection of spending and paying. And right now, I think that there's a spending element to it when you swipe a card, when you get a bill, but the actual paying is where the disconnect is manifesting itself.
- [06:37]
A
So then the question is like the one you posed in your piece. How do we get that connection back without giving up the convenience of the tech that we so love? Keeping things convenient, but staying savvy.
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B
Yeah, sure. So in talking to a number of people, they had different strategies where they tried to combat this disconnect that they felt. And, you know, there are a number of apps that are available and give you better insight on your money than you may have ever had before, but you really have to opt into them. And I think that that's where the disconnect is. Whereas before, you had this baseline of knowledge that was built into the system of paying, you don't have that anymore, and you have to actually want to understand it. And if you don't, then you could be at risk of all those things that I was talking about before about not spending, not saving, or not really utilizing your money in the best way possible.
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A
Any apps you can recommend? Anything good out there that you can steer us to?
- [07:33]
B
Yeah, well, I've said it now, I think, in two columns. I'm a mint user. I really like how I categorize spending into different types of purchases. Dave is another one. An app that I took a pretty deep look at that was forward looking but similar to a checkbook and would alert you if you're at risk of potentially overdrawing an account based on a regular payment that's coming in and then even moving into investing. Finimize is a site that I think is one that's millennial focused. The goal isn't to just give advice, but to let people learn on their own. And that has a pretty strong connection to the same type of learning that I think used to happen with the physical element of paying and doesn't necessarily happen unless you opt in anymore.
- [08:23]
A
Very good. For more, make sure you check out Kevin's articles@WSJ.com, a lot of very thoughtful, very useful, multiple millennial minded digital stuff you can check out. Kevin, thank you so much for joining us.
- [08:35]
B
Thank you so much for having me.
- [08:36]
A
And that's your money briefing. I'm Tanya Bustos in New York for the Wall Street Journal. Still running global payroll like a relay race deal replaces fragmented Payroll vendors with one global system. No third parties. Hire, manage and pay teams in 150 plus countries with in house local experts and white glove delivery and deal plugs into what you already use. Workday SAP NetSuite operate like a local everywhere visit d e e l.com WSJ that's d e e l.com WSJ.