PFM Tools Are the Next Big Thing
If consumers have taken anything away from the Great Recession, it may be learning the importance of budgeting and saving.
Stu Fisher, senior vice president of eCommerce at Addison Avenue Federal Credit Union, said that the trend among members has been to save more and pay off debts.
"Overall for the credit union, 2009 was a year of retrenching for members. Savings levels increased, and many online discussions revolved around paying off credit cards and reducing debt."
To meet the needs of members, Addison Avenue launched Addison Avenue Groups with Wesabe in 2009, a venue for members to get and give advice on a range of topics. In 2010, Addison Avenue will launch Jwaala's personal financial management suite.
Credit unions that have recognized this change in consumer habits are using technology as a way to respond to these new member needs and retain members that are switching from banks they've grown to distrust.
Sean Ward, co-founder of personal financial management software provider Geezeo, said that he has seen an "absolute explosion" in business over the past year. The majority of the business, he added, was inbound activity.
Aaron Patzer, founder of Mint.com and now vice president and general manager of personal finance at Intuit, said that at the beginning of last year there were 650,000 Mint.com users. There are now 1.8 million users. Intuit purchased third-party personal finance site Mint.com last year in a $170 million deal.
By the end of 2010, Geezeo will have more than 50 credit unions up and running with personal financial management programs. Geezeo also recently joined Symitar's vendor integration program, which makes the Geezeo software available to all credit unions that use Symitar's core processing system.
"Generally speaking, there is a huge market for personal financial management tools. Integrating personal financial management into a Web platform is the next technological leap credit unions are making," said Matt Davis, adviser specializing in implementation at the Filene Research Institute.
Davis works with credit unions to implement projects completed by Filene i3 teams. One of those projects is a free, anonymous financial analysis tool that credit union's can offer members called Debt in Focus. Filene has 280 credit union's beta testing the Debt in Focus software. So far the program has had 115,000 unique users, Davis said.
"Once banking customers make the switch to a credit union, it could be these types of products and software that end up keeping them," Davis added.
Ward said that he has had credit unions come to him to add PFM tools for a range of reasons: to gain younger members, capitalize on the mistrust in the banking world and to finally take advantage of technology that meets the credit union mission.
"In this economy more members are reaching out to their credit union for help. Requests to credit unions for education are at an all time high," Ward said.
Patzer said, at Intuit, they saw spikes in user activity when stocks would crash and the economy would take a dive.
Among the Debt in Focus beta testers, Davis said that some credit unions are using the tool to help members and potential members that they have been turned down for a loan. They direct those members to the site and have them go through the process to see what changes they can make so the next time around they can get approved.
"Anyone can get their balance online. People want more financial insight," Patzer said. "People are surprised when they find out they spend more on restaurants than they do on rent. Financial institutions have found it's a retention mechanism, having all accounts linked to one system keeps users around longer."
Davis also said that statistics from Debt in Focus show that online personal financial management tools are not just for younger members. The average Debt in Focus user is in the 35-45 age range.
Ward agreed that personal financial management products can be geared toward any age.
"These tools work in a motivational way for people trying to change their behavior. It doesn't matter if you're 20 or 80 years old."
Patzer said the average Mint.com user is 30 years old and affluent. The average income among Mint.com users is $80,000.
As time goes on, both Ward and Davis agreed that personal financial management online tools are going to continue to be important.
"More opportunities are going to continue to arise for people to do banking remotely. Especially as Gen Y gets older. Look at Intuit buying Mint, it shows that there are smart, rich people out there that are thinking the same thing," Davis said.
Ward said that he expects a good two year run with an increase in business. The first year he said will include early adapters and the second year will be other financial institutions catching up.
Patzer said that Intuit is looking to launch an Android application this spring and also add a financial goals tool that will act like a financial adviser and tell users how much they need to save per month to reach their goals.