Lipstick on the PFM Pig?

In an industry that is sometimes slow to innovate, Personal Financial Management (PFM) is one of the few banking applications where innovation has outpaced consumer demand. A 'hot' topic for over a decade, the ability to help consumers better manage their money through applied analytics, contextual design and visual tools has provided a battleground for financial institutions and direct-to-consumer applications.

With a quest to be at the center of account holder's lives, developers of PFM applications are moving from add-on applications to integrated solutions that can help define lifestyle segments. At the same time, the definition of PFM has evolved to include everything from basic visualizations to advanced engagement tools.

The question remains however . . . will these innovations capture the consumer's attention or simply be lipstick on the PFM pig?

In the newest in their PFM Insight Series entitled, Designing PFM Tools With The Customer in Mind, Mapa Research investigates the latest and most innovative PFM developments from around the world. Featuring in-depth quantitative and qualitative research from 60 banks, with examples from 23 banks and interviews from leading providers, the study hopes to provide guidance for banks and credit unions trying to decide if a business case for PFM can be made and if so, what should be the focus of development?

Building on the findings of the second edition report from Mapa Research entitled, Is PFM Still Worth Considering, the newest research found the following themes emerge:

• Customer centricity is as relevent as ever: A number of banks have integrated PFM within the overall digital experience, delivering added value through intuitive functionality.
• Leveraging new technology for cross-channel integration: While there are still only a few examples of exceptional integration across the online, tablet and mobile channels, more seamless tablet and mobile experiences are evident. Visuals have been improved, with more interactive tools including some available pre-login.
• Development and innovation must continue: For those banks and credit unions committed to PFM, more must be done to provide real time and even future views that help customers understand finances and improve their overall financial performance.

PFM offerings have expanded and have the potential to become increasingly important as a financial literacy tool, account aggregator, financial performance tool and in some cases, a non-interest income opportunity for banks and credit unions. 

Acceptance of PFM

You'd think that with the rapid adoption of smartphone and tablet technology, people would quickly embrace digital money management. Especially given the fact that spending on the development of PFM tools is expected to double between 2010 and 2015, according to CEB research.

Nothing could be further from the truth according to recent research from Aite Group, Javelin Strategy and Research, Celent and Forrester. The challenge for banks and credit unions is that, in reality, most customers do not proactively monitor or manage their finances, and few look to their bank for support.

According to Ron Shevlin, senior analyst at Aite Group, "Almost half of Americans say they don't look to their primary financial institution for help managing their finances and therefore don't care if the FI offers tools to help them do so. In fact, 80 percent of households don't even do budgeting."

According to a September survey conducted by Aite Group, 58 percent of U.S. consumers have not used online PFM tools and don't plan to. Another 14 percent said they planned to do so, with 15 percent saying they use PFM tools exclusively at their bank or credit union site. The rest said they use a non-financial institution site or multiple sites. A Celent research report was even more dismal, with only 4 percent of online banking customers being active PFM users.

Interestingly, the percentage of users by age category in the Aite Group study skewed towards younger consumers, with 44 percent of PFM users coming from the Gen Y segment, 28 percent from Gen X, 16 percent being Baby Boomers and 15 percent being seniors. This may indicate the take-up of mobile tools is exceeding online PFM applications.

Relationship Trumps Fees for Small Business Bank Satisfaction

At a time when discussion around higher bank fees is at a fever pitch, small businesses value the human touch more than ever and are more satisfied with their banks than they were in 2010 according to the just released J. D. Power and Associates 2011 U.S. Small Business Banking Satisfaction Study.

The study, which ranks satisfaction in the areas of product offerings, facility, fees, account information, account manager, credit services, problem resolution and account activities saw all of these categories except fees improve on a year over year basis.

"Contrary to popular belief that most customers are unhappy with their bank, small business banking customers are more satisfied than last year with nearly all aspects of their banking experience," stated Michael Beird, Director of Banking Services at J. D. Power and Associates. In a webinar done yesterday by the firm, it was emphasized that having a person assigned to the relationship 'who understood their business' was a primary reason for improved satisfaction. It was also mentioned that banks should not 'boil the ocean' trying to be the best in each category, but should leverage relationship managers to improve performance in as many areas as possible. In fact, while missing a single KPI does not impact satisfaction scores significantly, missing 3 or more measures can dramatically impact satisfaction.

Thinking Like Your Customer

Yesterday, I received a thought provoking Harvard Business Review blog from Scott Anthony, Managing Director of Innosight Ventures entitled, Think and Act Like Your Customers, where he discussed that many marketers surround themselves with what they produce as opposed to placing themselves in the position of a customer of their competition.

He pondered the fact that we may receive lots competitive intelligence from research decks and market studies, but we sometimes miss the simplest form of insight that can be derived by having our employees (or ourselves) use the products and services of the competition.