Integrated Personal Financial Management

This insight discusses why a completely integrated Personal Financial Management (PFM) software, even with less functionality than third-party offerings, is more powerful and creates a betting banking experience for end-users.

Why PFM Matters for Customers

Prior to the digitalization of banking, personalized financial services were reserved for high net worth individuals with access to financial advisors and wealth managers. The average consumer, on the other hand, was forced to manually track spending and self-aggregate all accounts in order to fully understand their financial story. This time-consuming, error-ridden process was not sustainable.

Conceptually, PFM tools ingest financial data, such as account balances and transaction history, and summarize them into a quick and easy-to-understand snapshot of a user’s current financial story. PFM tools are intended to provide insight into typical (and atypical) spending patterns, timeliness of payments and changes in account balances over time. In culmination, consumers have an easier time budgeting and tracking expenses in order to meet their financial goals.

The Problem With PFM Today

On the surface, PFM tools sound wonderful. Who doesn’t want automated analysis of their spending habits and personalized recommendations?

Unfortunately, in reality, PFM software falls short. The reason is quite simple.

The majority of PFM software available today is through third party providers. In other words, financial institutions will either partner with or provide data feeds to external PFM software tools. Because this software is not the same as the institution’s online or mobile banking, it becomes nearly impossible to offer a seamless experience end-users expect. Instead, users are expected to manually categorize transactions, logon to a different portal and self-aggregate accounts.

With respect to PFM, less is more. Only power users will take advantage of the myriad functionality third party PFM tools may offer. For the vast majority of users, convenience, automation and accessibility are more important.

Why should financial institutions incorporate integrated and user-friendly PFM tools?

Financial institutions have an opportunity to increase customer engagement by offering a fully-integrated PFM tool within their online and mobile banking platforms.

Enhance customer engagement: As customers become increasingly reliant on their financial institutions’ digital platforms for their banking experience, a simple, easy-to-understand PFM tool can enhance a financial institution’s digital presence and build customer loyalty.

Increase financial literacy: Integrated PFM tools allow online and mobile banking users to easily understand their financial story simply by opening their account on their device. Users can track spending patterns and account details, while also receiving notifications about upcoming or overdue payments. An integrated PFM platform fosters the development of positive financial habits.

Provide targeted offerings: Integrated PFM tools offer an important medium for financial institutions to connect with their customers. Financial institutions can offer highly curated offerings based on users’ account data.

Financial institutions that provide a fully integrated PFM solution within the online and mobile banking experience are able increase member engagement, increase financial literacy and increase the bottom line.

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