The Digitization of Personal Finance

I am going to teach you to be rich! Okay not exactly but if you are looking for a great personal finance book, the book by the same name is definitely worth a read. A more accurate introduction is I am going to explain the technology that enables companies to aggregate financial data and two platforms that leverage the technology well. No, I am not going to tell you to buy crypto, GSE or an NFT, those may all work, but I’m here to bring it back to the basics and explain how a couple of companies are using API’s and data analytics to make managing our finances a whole lot easier.

Banking apps, for the purpose of this post, is any financial site related to investment, banking and/or insurance. The apps that I am about to describe take your personal financial data generated through transactions, trade executions and link it to their websites and then aggregate that data, and make it easy for the end consumer to analyze the data. In most instances the data has already been analyzed and the software will make recommendations on how to improve your finances based on trends and goals you have communicated to the software. It’s one of the first times in history that individual consumers have been empowered to have the same data about themselves that large financial services firms have used for years to offer targeted products. The concept is relatively simple, you link your online banking account from your various institutions and it allows you to see all of your accounts in one place. This is significant considering that the average US consumer uses four different financial institutions with a large percentage of people using over eight according to Value Penguin.

Contrary to popular belief the below platforms do not store you credential data directly on their site. They use an API which grants them a unique token that is used every time you log on to access your account. This allows them to access the read only data on the platform however they would never be able to execute a trade for you or send a wire. The below diagram breaks down how this process happens in milliseconds. Protocols vary from site to site however the underlying principles are the same. Now that we understand the technology I am going to focus on two platforms that are making a difference using this technology.

Personal Capital

            Personal Capital, a platform that allows you to track finances is especially useful for aggregating all of your portfolios (401k, IRA’s and Individual accounts) into one place and analyzing your portfolios individually or as a whole. Ten years ago this software was only available to institutional money managers, however thanks to the power of SaaS consumers can access this same software. In today’s investing world where the individual investor has access to managing their assets in a cost effective way it is nice to have the ability to see everything in one place. One of my favorite features is a weekly progress report that tells the user how their portfolios did in comparison to the major indices such as the S&P 500. The platform also analyzes how much a consumer is paying in fees. I like this because it allows the everyday investor to make more informed investment decisions.


The days of working thirty years at the same company are long gone. As of 2020 the average time that an employee spends at a company is 3.2 years. Among other things, I think that a big reason for this is the availability of information we have access to. We can read on glass door what a company’s culture is like, we can look research a company on LinkedIn and gauge how good of a fit we are going to be. Along those same lines a website that allows us to do something very similar is BrightScope. This website analyzes and rates over 50,000 companies 401k/457 plans and ranks them against their peers in the industry. As the above picture from the company’s website illustrates, there can be a significant difference between a mediocre and an outstanding 401k plan. A lot of people are under the misconception that they are not paying any fees on the money in their 401k however the plans can be quite expensive. To me this is important because this is an important factor to consider when switching jobs. As you go to make moves in your own career this is one resource that I recommend you keep in mind.

            Online banking has made our financial lives a lot more flexible over the past decade. It does not come without risk which is why there is still a large portion of the population who do not use online banking. Common risks that people are skeptical of is the security architecture of websites. Some people think their data will be easily compromised. I understand this concern; it would be very scary for someone to have unauthorized access to your life savings. I hope I have done an adequate job explaining how you can benefit from these platforms and more importantly have an understanding of the technology that enables them to run.  


  1. Nice post. I’m really amazed at the various ways that startups are seeking to disrupt every facet of the Financial Services industry. It really is the wild west out there! I also checked, and BC’s plan was rated at a 71/100. Not bad, but could do better! I’d be interested to know more about what it’s based on.

  2. sayoyamusa · ·

    Thank you for educating me about the personal finance management! The apps look cool and helpful, and the individual investors/employees can have more power than before. I feel excited that digitalization in the finance area opens a door to lots of opportunities, but at the same time I’m concerned that it can bring a gap between people who can take advantage of them and those who cannot, meaning “amateur” investors to be exploited for example. Also, I had no idea that there are such apps to compare the benefit plans, but this is a great reminder that technology accelerates the transparency of firms and the management should keep in mind that. Highly informative post!

  3. therealerindee · ·

    Very informative post. To echo Sayo, I had no idea there was a site to see where a company ranks in terms of 401K. As I move through my career, the benefits are becoming much more important to me and this is a very useful tool to see where a potential employer stacks up. I think this is yet another space where consumers are being allowed to see behind the curtain which creates a more informed overall consumer. Personal finance is something that is incredibly important, but because there are so many different types of accounts and companies, it is often a very daunting topic for people. All of the personal finance apps are working to make things less daunting, which I think is a fantastic goal.

  4. Scott Siegler · ·

    This was incredibly timely, Samuel. I am currently reading and near the end of the book that you reference in your opening paragraph (can confirm, is great), and I had setting up an account with Personal Capital on my To-Do list because I thought the author made a compelling case from the angle of monitoring and maintaining a balanced portfolio across all of the different firms you can invest with. After reading the additional benefits you’ve shared, it’s a no-brainer that I need to set up my account asap. I also appreciate the privacy that the tokenization process brings into apps like these that require PII and private information. This was a great article, thanks for sharing.

  5. This is a great post and something I will consider for my own personal investing. These apps provide the ability to allow consumers to have more insight into their own portfolio, which I think is very important. Time and time again we hear stories of people who make uninformed decisions with their finances when they easily could have done the proper research and due diligence. I’m hopeful that more people will utilize these types of apps to educate themselves to make decisions that are reasonable because they have a better view of what their situation truly is.

  6. changliu0601 · ·

    Great Post.I totally agree with your point that people can utilize the data to optimize their portfolio. My mother used to be very skeptical about the safety of online banking.She refuses to use banking apps because she thought someone will steal her money through the app.I mean is there any way for the older generation to keep up with the technological advances like this.

  7. shaneriley88 · ·

    Excellent post. This class has keeps adding books to my pile. I’ve hear about Personal Capital from friends and never really gave it the 5min worth or research. Thanks for t-ing up the benefits in why that was both academically insightful and personally actionable!

%d bloggers like this: