The Future of PFM and Mobile Strategies
Consumers are increasingly tapping their smartphones and tablets to manage their money, a trend that may push personal financial management tools into the mainstream and open new opportunities for credit unions to help their members in real time.
About 15% of consumers prefer to check their financial accounts on a smartphone or tablet and two out of three say being able to check their bank accounts on the go gives them peace of mind, according to a study released in March by PFM software provider Quicken, an Intuit company. The study also found that 23% of consumers would not make a major purchase if they cannot check their finances first on their smartphone.
"Mobile is definitely at the top of everybody’s priority list and they see PFM as a very integral part of that mobile strategy," said Bryan Clagett, chief marketing officer for PFM vendor Geezeo in Tolland, Conn. Last October, Geezeo opened its application programming interface technology to third-party developers to build custom PFM applications that would integrate with mobile devices.
One of the most intriguing PFM features developers are working on would provide consumers with real-time financial information on their mobile or tablet that would help them with financial decisions at anytime, anywhere.
For years, financial institutions have been offering PFM on their websites, but it has a low adoption rate among consumers. About one in five, or 20%, of U.S. consumers use PFM, though that percentage has been projected to increase to about 30% by 2014. Despite the low adoption rate, credit unions such as the $912 million Unitus Community Credit Union in Portland, Ore., have reported members who use online PFM are among the most profitable and most engaged members.
Ron Shevlin, a financial services research analyst for Aite in Boston, has been an outspoken critic of online PFM contending that while it does a great job with showing consumers where their money is and where it goes, the tool doesn’t do enough.
"I talk to a lot of industry executives, PFM vendors and I tend to hear similar things," Shevlin said at a National Consumers League online panel discussion on PFM. "They say things like PFM is going to help people gain an understanding of their financial lives, empower them to make smart financial decisions, but the reality is that the tools really don’t do that."
In addition to showing where their money is and where it’s going, he argues PFM needs to become an analytical tool that provides consumers with foresights, or the ability to know how to manage their money, and insight, the ability to know how their money is performing.
PFM would be much more useful, Shevlin said, if it helped consumers compare and analyze their monthly bills, mortgages, re-financing offers and other products and services that would benefit their finances. "These are things that make a difference for consumers," he said.
These types of PFM mobile functions appear to be surfacing.
For example, ING Direct in Canada released a mobile banking app, Small Sacrifices, that graphically shows consumers the short-term and long-term financial gains they can make by forgoing daily, weekly and monthly spending on nonessential items and depositing that money into a savings account. The app creates bar charts that display how the money saved would grow over five years or 25 years.
Mark Schwanhausser, senior analyst with Javelin Strategy & Research in Pleasanton, Calif., believes banks and credit unions are in the best position to win the PFM space because they hold the financial information of their customers. But he warns that banks and credit unions can’t think of PFM as a passive desktop tool.
"PFM can be very powerful," Schwanhausser said during the National Consumers League online panel. "When you start to put PFM on a mobile device, which is already happening and which will continue to happen, it will become even more powerful. We’re moving into an era of interactive finance where it will always be with you (via mobile devices.)"
Tarrah Palomino- Prim, assistant vice president of web services at the $1.9 billion SAFE Credit Union in North Highlands, Calif., agrees that mobile will increase engagement with members to help them improve their financial lives.
Nearly 32,000 of the credit union’s 162,000 members use their mobile devices to bank. Members are using smartphones and tablets to take advantage of merchant offers and cash rewards on their debit cards.
"Our usage of our cash rewards (program) went up tremendously when we put it on mobile and tablet," she said.
Palomino-Prim knows PFM on mobile will be the next step for the credit union to increase engagement with members.
"We don’t have PFM on mobile phone or tablet yet, but it is definitely something we hope to see on the horizon," she said.
Javelin’s research shows a must-have consumer PFM feature is the ability for consumers to view all or their accounts on one site. Javelin also identified features that could open more opportunities for financial institutions by extending PFM to serve customers as they shop and buy such as rewards reminders, personal finance alerts, comparison-pricing tools, calendar view of finances and price change alerts.
"PFM data will enable a bank or a credit union to basically hold conversations (with their clients/members)," said Schwanhausser. "There are all kinds of ways PFM can be extremely critical, important and useful, but we’re not there yet."
We’re not there yet because these PFM functionalities are still under development or are being tested. What’s more, there are technology hurdles that need to be cleared as well.
Clagett of Geezeo expects to see credit unions integrate PFM into mobile this year. But it will take some time before consumers see real-time mobile transactions because that will largely depend on the credit union’s core system capabilities and other technology challenges.