PFM: Platform For Customer Engagement
3 Mar
The title of this post is the title of an Aite Group report I recently published.
I’ve been an analyst for 11 of the past 13 years, and throughout that time I have done everything in my power to avoid making predictions. I’m a prescriptive kind of guy, not a predictive one.
So when I say that 2010 will be the year of PFM (personal financial management), you know that I believe it. Sure, social media and mobile (or as @jpunishill proposes to call it: Mocial) will garner more press and attention, but the smart bankers (and credit union execs), while experimenting with social media, will make serious investments in 2010 to build PFM capabilities.
Why am I so convinced? Here are some of the highlights of the report:
PFM is having a significant impact on users’ financial lives. An overwhelming percentage of users say PFM has given them control over their financial lives, many are saying that they’re saving more money as a result of using PFM (and a majority of Gen Y users, I might add), and a good chunk are paying less in overdraft fees, late fees, and interest.
PFM is having a positive impact on users’ relationship with their banks (and credit unions). This is true, even though the vast majority of those we surveyed don’t use PFM on their bank or credit union’s site. Those who do use PFM on their FI’s site are even more likely to cite positive benefits to the relationship.
PFM offers banks and credit unions an opportunity to meaningfully engage with customers (and members). Facebook and Twitter are nice tools, but FIs need ways of interacting with customers in the context of their financial decisions. As consumers use PFM to not just aggregate accounts and track spending, but to assess their financial performance and look for advice and guidance on making smart decisions, PFM offers FIs a platform for engagement that Facebook and Twitter can’t offer.
If you have any interest in PFM, you should register for a webinar I’m presenting with Yodlee on March 10.
Definitely the year for PFM and cost savings here at Vantage CU. We are in the process of building our PFM site (part of our Geezeo deal), which will include a community sub-site.
I agree with you that many members may be more comfortable using a more focused/traditional community site instead of some of the newer social channels like Twitter and Facebook. I’ll be curious to see the adoption rate compared to our other channels.
Couldn’t agree more.
Ron….thanks for letting your readers know about the webinar. I’m in.
On your third point…do you think banks and CUs will be able to provide meaningful advice with this info? That’s not such as easy thing to pull off.
I think we’ll soon also need an interface to manage an aggregated view of our finances in the cloud.
@Tinfoiling: Thanks for agreeing, but I can assure that not everybody agrees with us. At the CUES CEO conference a few weeks ago, one CEO got up to say “nobody is asking for this”. I think I said “nobody ASKED for the iPod, either.”
So with all apologies for my snarky answer, the underlying message is that you’ve got to have a vision for how PFM can improve the FI-customer relationship.
@Jim: I don’t believe that the advice provide within the confines of the PFM has to be all-encompassing or rocket science — i.e., it could be simply “guidance” like Wesabe offers when it helps users compare AT&T to Verizon by displaying user ratings, average spend, etc.
In other instances, the “advice” could be: “this is too complicated, give one of our advisors a call.” The problem here, as I know too well, is that for many banks, the default message is “call us” or worse, “click here to apply”.
@Frederic: The thought of my “finances in the cloud” scares the you-know-what out of me.
Come on, Ron. Don’t you think that by the end of next year we’ll have completely implemented open standards that will let us exchange information or move accounts between different nodes in the cloud (that we may still be calling banks or fi-services) and that we’d need a consolidated view on this? OK, maybe not by the end of next year. But seems to me that the time between now and eventually has considerably shrinked over the past decades.
The question is also, if you are a customer of multiple banks, would you rather use an independent PFM (like Mint) that would have no connection to your financial services and would be able to propose you “independent” advice or would your trust your bank’s PFM to aggregate your financial data (with the issue of privacy)? I believe the first one creates additional value and challenges banks but I am not sure it is the trend for most people.
Also really looking forward to your webinar!
@FredericBaud. I really like your “vision”. It also matches with the fact that ultimately all those financial data belongs to me and not to the organization hosting them. External PFM on one side and Blippy on the other are really pushing for this. I can bring my financial info to the services I need, whether assets or purchase, independently of my financial services providers (bank, credit card, etc.)
Tekfin: Most people (in the US, at least) are customers of multiple banks. Most people have one or two primary spending accounts: their checking account (debit card) and/or credit card). The promise of PFM is in helping consumers better manage their money. For most people, this means spending management, not asset management. Consumers shouldn’t need to link every account they have in order to reap benefits from PFM. My bet: If a customer gets value from PFM from linking just one or two accounts, then s/he will be less resistant to aggregating accounts on one FI site.
Regarding “independent advice”, you make a great point. But the advice (and offers) that a bank/CU provides shouldn’t be strictly limited to the financial accounts. BTW, there’s a pretty healthy percentage of third-party PFM site users who said they’d use their bank/CU’s PFM if it had one, and it was good.
Ron,
you said “I’ve been an analyst for 11 of the past 13 years, and throughout that time I have done everything in my power to avoid making predictions. I’m a prescriptive kind of guy, not a predictive one.
So when I say that 2010 will be the year of PFM (personal financial management), you know that I believe it. Sure, social media and mobile (or as @jpunishill proposes to call it: Mocial) will garner more press and attention, but the smart bankers (and credit union execs), while experimenting with social media, will make serious investments in 2010 to build PFM capabilities.”
I say amen. I could not agree with you more.
It will be much easier to gain bottom line results from OFM (Online Financial Management) then it will from “mocial”.
@dmgerbino