Personal Financial Management Tools Help Customers Help Themselves

personal-finance.pngPersonal financial management (PFM) has a dual personality these days. On one side are Quicken-like planning packages that simplify budgeting and other financial tasks, but still require a certain amount of regular care and attention from users. For years—decades even—this type of “traditional PFM” has attracted about one in five consumers. “That market is steady, though its future is dimming,” says Mark Schwanhausser, director of omni-channel financial services at San Francisco, California-based technology consulting firm Javelin Strategy & Research.

Exploding in number, on the other hand, are web and mobile apps that provide quick bursts of financial information and activity for people making on-the-go financial decisions. The apps run the gamut, helping users get rewards, avoid late fees, pay bills, save on taxes, and a whole lot more, all through the slick interfaces common to today’s mobile devices. “PFM in the future goes so far beyond what it is today,” Schwanhausser says. “We’ll see PFM thrust in front of consumers every time they log on.”

Perhaps no company better exhibits PFM’s split personality than D3 Technology Inc. of Omaha, Nebraska. Founded in 2007, it adds its PFM tool to the online banking software of various providers, most notably Jack Henry & Associates of Monett, Missouri. More than 220 banks have signed up for the popular service.

But Chief Executive Officer Mark Vipond is not overly optimistic that the software will move PFM usage much beyond the long-standing rate of 20 percent, noting that the banks are mostly deploying PFM as a separate tab from online banking, creating yet another silo to support as well as a distinct user experience, mostly for “money hawks” who want to dive into their finances. “The adoption levels mimic those we’ve seen elsewhere,” he notes.

While the company plans to continue supporting PFM as a separate add-on to online banking, hope for much higher adoption lies in a version of the software D3 has been working on for the past two and a half years. The new digital platform provides equal support for PFM and online banking (as well as money movement). Burdensome PFM tasks like budgeting and expense categorization occur automatically, based on transaction history, right within the online banking interface. Only half in jest, Vipond said he expected usage to reach 100 percent since the PFM analytics will take place as a standard part of the online banking experience, without users having to log in elsewhere or do anything to set up the PFM functionality.

Just as important, the integrated platform will give banks access to a single, comprehensive view of all customer transactions and data, allowing banks to create a personalized, Amazon-like user experience in which they can predict a user’s cash flow and recommend products and services accordingly. “This re-establishes the bank as the primary financial services provider, using the customer’s own data to personalize the experience,’’ Vipond says.

Increasingly, that experience will be far more dynamic than the spreadsheets and budget trackers of the past. Star Financial Bank of Fort Wayne, Indiana, for example, depicts expenses in the form of bubble graphs, using software from MoneyDesktop Inc., of Provo, Utah, deployed as both a mobile app and an integrated part of its online banking product. “It’s incredibly interactive,” says Kristin Marcuccilli, chief operating officer of the $1.7-billion asset bank.

Since rolling out the service in January 2013, all of Star Financial’s customers have access to the PFM functionality through online banking, and about 20 percent so far have downloaded it to their smart phones or tablets. “We’ve had customers tell our bankers that they’ve never cared about their finances before, but now they’re following their bubbles, and they’ve got it right in their pocket. The tool makes it much more fun,” says Marcuccilli.

“While PFM in the past put the onus on users to be proactive, PFM in the future will put banks in the driver’s seat, enabling them to ping customers with recommended actions,” says Wade Satterfield, the director of digital service systems at Arvest Bank. The $14-billion asset institution, based in Lowell, Arkansas, is working on a PFM system that it will roll out sometime in 2015.

Like online banking or bill payment, PFM is a service for which banks generally do not charge. So how do the investments in PFM make sense for a bank’s own budget? For Marcuccilli, the return comes from increased levels of customer engagement, leading to stronger loyalty and longevity. Satterfield says banks need to keep up with the digital experiences customers are getting from other service providers. “We really don’t have a choice.”