The number of European banks adopting Personal Financial Management (PFM) solutions has more than tripled in the last 4 years. Currently, around 40 leading banks across the continent have deployed PFM.
But why do banks adopt PFM in the first place? What are their true motives and justifications in choosing PFM?
We conducted a study of 15 banks who have adopted the tool, and here’s why they did it:
1. To defend their market position
- Banks see PFM as a tool to differentiate their brand and create a new valuable service for their customers.
- To stop third party PFM providers such as Mint.com from stealing their customer interactions.
- To catch up with competitor banks who have already adopted PFM.
2. To increase customer satisfaction, loyalty & retention
- PFM gives customers a heightened sense of convenience, simplicity and organization.
- To help customers to set and achieve their personal financial goals.
- To give customers full transparency and awareness of their income and spending, enabling them to manage their finances independently.
- To meet customer demand for control, which has especially increased since the financial crisis
3. To boost revenue generation
- PFM generates an enormous amount of valuable customer data, which in turn creates cross- and up-sell opportunities.
- Marketers gain more insight into customer needs and wants.
- To migrate financial advice out of branches and into digital channels.
- Including savings and loans business units in online banking enables consumers to apply for new financial products online.
Virtually all banks agree that PFM offers new value-added services, which help to make their online banking propositions more attractive. However, banks remain skeptical about the Return on Investment of PFM. To overcome this uncertainty, banks and vendors must work in tandem to discover and exploit the ROI of PFM.
The consensus is that PFM has huge potential. In the words of Online Banking Report:
“Personal Finance Management (PFM) functionality is the highest potential ROI project for retail financial institutions to implement.”
However, there is a catch - only the banks who are prepared to tap into it will find opportunities to profit.