Personal finance management (PFM) tools can allow banks to create highly personalized customer experiences and, in turn, drive revenue and retention. 

The diversity of today’s PFM market illustrates the value that a wide range of providers see in developing such offerings, but its promise — PFM was lauded as the future of banking for over a decade — has long failed to materialize for most incumbent banks as well as consumers. PFM user share plateaued at between 10% and 12% as of 2017, the most recently available data, per Celent.

This plateau is the result of several design flaws that made earlier iterations of PFM tools unengaging. These include only showing users their financial data without providing actionable insights, personalized financial advice, or tools to manage their finances more easily; poor user experience (UX) due to many banks’ PFM functionalities being confined to separate tabs to better track engagement metrics; and limited data sharing before open banking regulations (in some jurisdictions), making personalization difficult to achieve due to incomplete financial data for each user.

Today’s most sophisticated PFM features, however, can give users maximal control of their finances while requiring little effort on users’ end through advances in AI, smart analytics, automation, and regulations like open banking. A new breed of PFM providers is drawing on these developments to roll out features that are more insightful, accurate, and predictive than before, making them a powerful tool for getting consumers to engage with their finances in a meaningful way. Customers are responding to this upgraded version of PFM, and banks need to pay attention or they’ll risk eroding customer engagement and loyalty. As customers engage with their finances more meaningfully, banks can translate this increased engagement into more revenue.

In the Personal Finance Management Disruptors report, Insider Intelligence gives an overview of the major categories of players shaping the PFM market today. We continue by outlining some best practices for banks looking to upgrade their PFM offerings, based on exclusive interviews conducted with seven leading PFM providers. We then present the PFM Digital Maturity Model to show banks and other providers the standards they should be aiming for as they build new PFM features to satisfy customers. We continue by making the case for why banks should reinvest in PFM, and why they can’t afford not to. Then, we examine eight sophisticated PFM features we believe are bringing significant value to customers and banks today, enriched through our interviews with the companies providing them. 

The companies mentioned in this report include: Cleo AI, Greenlight, Meniga, Minna Technologies, N26, Personal Capital, Personetics, and Strands.

Here are some of the key takeaways from the report:

• PFM tools allow financial services providers to create highly personalized customer experiences and drive revenue and retention in turn — but banks are falling short of customers’ expectations. Consumers are more dissatisfied with their banks’ PFM services than with any other type of services they provide, and more than 40% of those surveyed stated that they find PFM services from nonbank providers more useful and helpful, per Oracle.
• There’s ample demand for bank-provided PFM tools, however, suggesting that banks should revisit in PFM tools as an essential value proposition. Over 75% of respondents to an RFi survey cited by The Financial Brand said they would prefer to use PFM tools from their primary financial services provider (typically a bank). This compares with just 6% who said they’d prefer PFM tools from fintechs or neobanks.
• The more that banks can employ highly mature PFM tools, the better they will be able to capture the significant opportunity presented. They can specifically gain ROI on their PFM investments in two key areas:
  • Customer retention: 71% of Gen Zers believe brands should “help them achieve personal goals and aspirations,” per PSFK data, so incorporating personalized insights and advice into banks’ PFM products would create substantial customer value. 
  • Increased customer lifetime value: On average, bank customers who make use of PFM tools are 18% wealthier than those who don’t, per Javelin Research data cited by MX, and they tend to own every major financial product, such as mortgages and car loans, all of which are key bank revenue sources.

In full, the report:

• Provides best practices for banks looking to upgrade their PFM offerings to bring more value to their customers.
• Gives an overview of the main types of companies shaping the cutting edge of PFM in today’s crowded market.
• Presents the PFM Digital Maturity Model to help banks understand what separates mature from basic PFM features.
• Explains why reinvesting in PFM is imperative for banks, and what they stand to gain from doing so.
• Examines winning strategies for implementing sophisticated PFM features, based on exclusive interviews.

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