Banks Need To Redefine Personal Financial Management (PFM)

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As usual, NetBanker nails it with its post on Will mobile finally make PFM popular? In it, Jim writes:

“Mobile is, and will be, a huge driver for specialty PFM apps. App stores help consumers find the services, and mobile makes them less daunting to use. But it’s not just the mobile platform driving usage at these four challengers (see below), it’s the way they have positioned themselves with tangible consumer benefits (e.g., save money by spotting fraud charges) rather than the nebulous (e.g., “manage your spending for a better life”). Parsing this list a little closer, only Mint is positioned as a pure PFM. The challengers are all backing into PFM from various niches.”

He then goes on to talk about BillGuard, Lemon, Credit Karma, and Manilla.

My take: 1) NetBanker is spot on that mobile is — and will be — a huge driver for specialty PFM apps. Consumers are showing a strong willingness (if not desire) to download and use apps that have a very (or relatively) narrow set of functionality. It’s incredibly easy for someone to download an app, test it out, and see if it add values. And there’s data that shows that finance apps are doing well with consumers, compared to other types of apps. The following chart shows app “loyalty” as defined by Flurry:

20130802 FlurryThe chart shows that relative to a number of other category of apps, Financial apps are used an above average number of times per week (usage), and that consumers keep Financial apps on their mobile device an above average length of time (retention). Since Flurry gets its data from apps developers, I don’t think bank/credit union apps that provide account access is included in this data (I could be wrong about that).

2) NetBanker may be overstating the ability of app stores to “help consumers find the services.” A recent visit to the Apple apps store revealed six pages of apps that begin with the letter A. I couldn’t even begin to count how many pages of apps there were all together. An analyst with Canalys (a firm that tracks the apps market) recently said: “When we speak with app developers, many are concerned about monetization or platform fragmentation, but the number one problem they face is getting their apps noticed.”

3) The last two sentences in the quote above really intrigued me: “[O]nly Mint is positioned as a pure PFM. The challengers are all backing into PFM from various niches.” What’s a “pure” PFM? Why does NetBanker think the firms listed in the post are “challengers” to Mint? And why does NetBanker think those challengers are “backing into” PFM?


The core of the issue here is simple: There is no clear definition about what PFM is (and isn’t). There is no common understanding — among bankers or consumers — about what PFM is. I don’t have research to back me up, but I’m willing to bet that if you showed a representative sample of consumers a list of companies that included Mint, BillGuard, Lemon, Credit Karma, and Manilla, and asked: “Which of these companies offers a “pure” PFM?” you would get blank stares from 98% of them.

Even among bankers, the term PFM is too loosely used. I (think I) know exactly what Jim means when he refers to Mint as a “pure” PFM — a PFM platform that offers budgeting, expense categorization, and charting/forecasting/analysis tools. Geezeo and Money Desktop, which choose to offer their technologies through FIs, rather than direct to consumers like Mint, are probably considered “pure” PFM tools,  as well. The term PFM has come to mean “budgeting, expense categorization, and charting/forecasting/analysis tools” in the banking community.

But the majority of consumers have shown little interest in these types of capabilities. Instead, they want to know their credit score, how it’s changing, and what to do about it (Credit Karma), or they want to track or prevent grey charges on their debit and credit cards (BillGuard).

These capabilities are “personal financial management” capabilities. They’re not “backing in” to PFM. They ARE PFM. And they’re not challenging Mint (or other “pure” PFM platforms) — they’re providing additional capabilities not found in Mint.


I’m a big fan of what the “pure” PFM players are doing. But bankers need to redefine their concept of PFM, and expand the definition to include a wider range of “PFM” capabilities.

What they’ll realize is that their “pure” PFM deployments fall well short of providing the range of capabilities that consumers want and need. And they’ll realize that their”pure” PFM deployments need to become more of a platform that integrates the “challengers” into the platform.

It won’t be the Apps Stores that help consumers find the “specialty” financial apps out there. It will be the banks and credit unions. The FIs will vet the apps, recommend to their customers which ones are good, safe, and can be integrated. Consumers will pay for these apps, and FIs will get a cut of the revenue for helping the developers reach a wider base of users.


To get back to the core question of the NetBanker post — “will mobile finally make PFM popular?” — the answer is: “It depends on how you define PFM.”

If you continue to have a narrow definition of PFM (i.e., budgeting, expense categorization), then the answer is NO.

On the other hand, if you define PFM more broadly, then the answer is YES.


But a lot of bankers still won’t grasp the strategic importance of this.

It represents a shift in the underlying value of banking.

The old value was “money movement.” Banks were (still are) good at moving money. You parked your paycheck in the bank, then wrote checks (and more recently swiped your debit card) to the places and people you did business with, and the bank took care of all that.

The new value is “money management.” Despite the flagging economy and all the talk of the “1%”, the numbers don’t lie: Compared to even 20 years ago, our (Americans’) earning and spending power is as strong as ever.  But many of us don’t need help allocating and investing assets, and we don’t really need or want help to do budgets or categorize expenses.

There’s a whole bunch of stuff in the middle (where budgeting is at the bottom or left, and investing assets is at the right or top). Things like what BillGuard, Lemon, Credit Karma, and Manilla (and other “specialty” PFM providers) do.

Helping consumers not just make smart choices about how they spend their money, but what tools they use to track, spend, and manage their money could be — I think it WILL be — the way FIs compete in the future.

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