Imagine that you’re done with all your work and chores for the day and sit down in front of the TV. You have no idea what to watch, but a light-hearted comedy would sound good. The one that has just come out and is just like that other one you saw last week, and everyone says you’d probably enjoy. What was it called? God only knows. Anyway, you turn on Netflix.
Your viewing data pops up right on the screen. There’s a chart of your most-viewed titles. “Wow, did I really go through all these in a week? Well, good to know, I guess,” you conclude. You move on to the next chart with the latest movies added. No genres in sight. Just titles. You grudgingly pull up your phone to google one after the other.
What’s wrong with this picture?
Exactly. And it’s the same thing that was wrong with early personal finance management tools. More often than not, they offered clunky customer experiences, overwhelmed users with data and were more hassle than they were worth. In fact, they left the actual money management to customers themselves – categorisation, calculation, decision-making and all.
“Ask many financial institutions today about PFM, and many will say it’s unnecessary, unutilized, unwanted, and, increasingly, dead,” pointed out Stephen Greer and Daniel Latimore of Celent in a 2017 research report. The biggest reason why PFM tools remained such a lacklustre affair, they said, was because they required too much effort from customers. “Financial management for most people is not very fun, and at times, very dismal,” Greer told American Banker.
Would people still watch Netflix if it worked like I described at the beginning? Probably. But would it be the company that has changed the way television is made and watched – with 182 million subscribers worldwide and a quarterly revenue of $5.77 billion? Unlikely.
If you ask me, the number one reason behind Netflix’s success is that it gets people. Simple as that. Sure, there’s the endless string of binge-worthy shows, the low-price, high-revenue mentality and the convenience of streaming videos when you want, where you want. But easy-to-access content that’s meticulously tailored to users’ preferences – that’s a real Netflix special (pun intended).
It’s also what the first generation of PFM tools profoundly lacked. Along with another crucial thing: the understanding that to take control of their personal finances, people don’t need data. They need knowledge. Whether it’s about choosing what flick to watch or which car insurance to buy, customers are looking for perfectly timed, personalised, actionable recommendations right at their fingertips.
“Banks in particular think they’ve ticked the financial well-being box by offering digital money management tools. But early implementations of these tools have often fallen short of customers’ expectations, failing to drive behavioural change and therefore resulting in poor customer adoption,” explained Forrester senior analyst Aurelie L’Hostis in a 2020 market intelligence report. “Consumers have unique financial needs, which vary depending on life circumstances and over time. Financial services firms need a more holistic, personal, and proactive approach to customers’ wellbeing.”
Financial services firms need a more holistic, personal, and proactive approach to customers’ wellbeing.Aurelie L’Hostis, Senior analyst at Forrester
How is this different from what traditional PFM tools brought to the table? Showing a chart on how much a user spends on utility bills per month is nice. Sending off an alert that they are living beyond their means might be a lifesaver. Checking your current account balance online is routine. Getting a push notification from your bank on how to invest your extra income that month can be a game-changer. A widget that keeps track of your favourite stores is handy. A reminder where you can get 2% cashback if you pay with your credit card is a goldmine.
Real-time, easy-to-digest insights that help customers make financial decisions faster, better and smarter are the future of PFM tools. And the future is here.
Want to see what the future of personal finance management looks like? Discover how personalised financial insights can turn accounts and spending data into a win-win for banks and customers.