If any technology deserves the award for “most missing its potential”, it’s Personal Financial Management (PFM) software.
We’re not giving consumers what they want.
Consumers tell us that they want all their account information in one place – even from other banks. They also want alerts and help with shopping and card reward usage.
Basically, they want help making decisions.
That’s why PFM fails today. It provides lots of information, but no help making decisions.
Mark Schwanhausser, director of multichannel financial services at Javelin Strategy & Research puts it this way:
PFM will appeal to a mass audience of online and smartphone-toting consumers seeking help with immediate, on-the-go, everyday financial tasks and decision-making. It is only a matter of time before PFM will be virtually ubiquitous, offered not only by FIs but also by billers, mobile carriers, insurers, retailers – anywhere consumers make financial decisions.
The PFM of the future Mr. Schwanhausser describes here is what I called Decision-Oriented PFM. I describe it in my book, Seven Billion Banks. Very few PFM tools are integrated into the mobile experience. Instead they sit on the desktop version of the online banking application – when they’re available at all.
The concept that consumers want alerts to help with decision making is consistent with the mobile strategy I laid out in an earlier article. Those push alerts are extremely critical not just for adoption, but for the actual value created by the application. In fact, it might argue that PFM should be a mobile app and not a desktop app at all. You may organize and plan at your desktop, but you “decide” on-the-go. You need your mobile phone packed with this information – not stuck on your desktop or trapped in a desktop-only version of your bank’s website.
Let’s think through the major decisions customers need to make.
1. Borrowing Money
There are a number of things PFM tools can do to help customers decide whether or not they need to borrow money. The obvious is rate shopping – which of course, consumers pointed out in the Javelin research. But more than that, they need to know how much they need to borrow and whether its wise at all to do it.
Move past generic debt-to-income ratios and deliver value in cash flow forecasting. Can your customer afford the payment they’re contemplating? Base it on the cash flow of the account and the other payments they have to make.
What are their other options to borrowing? How much time would it take to save the money up? Review any cash left over or spending categories considered “extra” and build a savings plan that gets the consumer to their goal.
2. Saving Money
Here I’m talking about actually putting money away for a rainy day and not saving money on things you buy. (We’ll get to that in a minute.)
Is there cash drag in the account? Review the balance over time and see if there’s an opportunity to move money into savings – even temporarily – in order to earn interest (or more interest.)
Does the customer have a savings goal in mind? Do they have several? The bank Simple does a great job here by making savings goals a separate line item subtracted from cash flow – as if the cash wasn’t there.
And when the customer decides to act on a savings plan, make it one click to set up the recurring transfers. That shouldn’t be another menu item. Don’t create the “copy-paste” problem of applications where I have to manually carry over information from one part of the application to another. Context-sensitive features.
3. Spending Money
Consumers have said over and over again, they want help with spending money. They want discounts. They want rewards.
And they also want help. That help should come in the cash flow forecasts that every PFM should be based on. The opening screen should forecast balance until the next paycheck. PFM should integrate in with banking transactions – such as the ATM.
If your customer goes to the ATM and withdraws too much money, the PFM functionality within the bank should provide an instant message that says, “Hey, we think you’re going to overdraft next week. What do you want to do?” With one click functions to transfer or borrow or cancel.
The PFM tool set needs some work. We can turn that “F” around from fail to flourish.
But that can only happen if PFM vendors and banks focus on created context-sensitive information and functionality that helps customers make decisions.
For more information about PFM and other customer tools, check out my book, Seven Billion Banks: How a Personalized Banking Experience Will Save the Industry.