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Digital banking Updated: 21 Aug 2017

The relationship between banking and personal financial management tools

PFM tools must prioritize the wishes and needs of the consumer over and above the bank's own business if they are to succeed.


When personal financial management (PFM) began to weave its way into the banking sector, both consumers and the financial institutions themselves were skeptical. The consumers did not understand them and were reluctant to trust this new service, whereas the banks and credit unions struggled to find a way of fitting these tools to their products and making them attractive to the consumer. PFM tools were created with the aim of presenting accounts, balances and financial transactions in the customer's own language.

The study by BBVA's Financial Services says that the Personal Financial Management tools (PFM) help consumers follow, classify, remain informed and manage their personal finances. Banking based on PFM represents the evolution of traditional online banking, now that non-banking PFM is becoming an ever greater competitive threat for banking solutions.

These tools took some time to get off the ground, but today almost all the aspects of consumers' financial lives have migrated to the digital channels. People look for online PFM tools so they can stay up to date in the field of finances.

These tools took some time to get off the ground, but today almost all the aspects of consumers' financial lives have migrated to the digital channels

"What it comes down to is that people need advice, but they don’t seek advice", says Rita Sly, managing director of channels at ATB Financial, a regional Canadian bank that launched their PFM Track It tool from MX, in The Financial Brand. Rita points out that when people are familiar with a branch, it's relatively easy to link them with a personal manager.

Where is the key? “Delivering advice in a way that naturally fits within people’s patterns of behavior – that’s the sweet spot for all financial institutions", adds Sly. "If you don’t leverage technology to make it part of customers’ day to day lives, you’re missing an opportunity to help them”. Rita Sly took only six months to get 46% of their online banking clients to adopt their PFM product.

Nate Gardner, Executive Vice-President of Client Services at MX, the Fintech firm behind the ATB's PFM solution, says the company wanted to start afresh and reinvent the category. "We fundamentally tossed the traditional notion of PFM into the trash –the notion that says, ‘We have PFM, let’s check the box and move on.’ Instead, money management should be a key part of the banking experienceacross all channels."

Gardner’s PFM philosophy is fairly straightforward. He believes a good PFM solution should do the heavy lifting for users –make life easier. So the development team at MX focused on a critical component in the consumers’ experience: ensuring that user transactions are automatically categorized with precise accuracy. It may sound simple, but Gardner swears this is the trick to make customers value PFM tools. This makes it unbelievably easy for users to manage their money.

The key for innovation

Staying one step ahead is an obsession for ATB in order to create loyalty among their customers. "There’s so much innovation happening in the marketplace around financial services, and we need to be actively seeking out what’s on the horizon" say ATB. To explore innovations within the industry and ferret out disruptive threats facing their bank, ATB Financial created the “Emerge Group”.

This group of experts investigated everything from crowdfunding through to collaborative savings plans –as well as PFM tools. Curiously, it didn't see this as a threat for the banks. PFM tools were not a widespread technology in Canada at that time, as there was only one bank in the country that provided the services, and one other that just dabbled in the market. They saw a gap and went for it: "We’re here to make banking better for people and make their lives richer, and this was the tool we needed in order to do that", concludes Sly.

BBVA's study highlights that: “PFM can potentially transform the consumer experience, provided they are motivated by the wishes and needs of the consumer rather than by the priorities of the banking business. People want to learn to manage their lives better, not their finances”. And another tip for success is “Adding social capacities by identifying social sites that are important for the consumers (not only the ones the bank decides to sponsor)”.

More than just a financial tool, if personal financial management is be successful it must take account of the customer's psychology.