Evolution of PFM: The Tool Transforming Digital Banking

Online banking and personal financial management solutions (PFM) emerged at around the same time, during the early 1980s. Although obvious overlap exists between these solutions, their evolution and market acceptance have been significantly different...

If online banking has become a must-have, PFM has been seen as a “nice-to-have” tool. But this distinction hasn’t stopped 3rd party financial management solution providers from entering the PFM space. Two notable first-movers were Intuit with Quicken and Microsoft Money. By the end of 80s, these providers virtually owned the PFM category.

By the mid-1990s, the first American banks (Wells Fargo, US Bank, Michigan National and First Chicago) entered the PFM space. Other U.S. banks soon followed, but the mainstream was slow to pick up the trend.

Three decades later, market conditions have changed. Online banking propositions are becoming commoditized, and many banks are looking for new value-added services to differentiate their offers. Meanwhile, customers are demanding better online banking tools to manage their finances. Banks are turning to PFM for answers since the tool has all the right ingredients all in one place.

Over the last few years, PFM has shot up the priority lists of many digital channel executives and wealth management firms worldwide. Hundreds of banks around the globe have already adopted PFM tools. In the United States, a usual forerunner in innovation adoption, 1 in 5 leading banks have deployed PFM, including Citigroup, Bank of America, Wells Fargo, HSBC North America, PNC and ING. Additionally, hundreds of credit unions have embraced PFM to differentiate themselves and meet the changing needs of their customers. 

Europe started late and slowly, but in the last 2 years PFM implementations have more than tripled. Now, more than 40 leading banks across the continent have PFM in place. To name a few: Deutsche Bank (Germany), UBS (Switzerland), Lloyds & Barclays (UK), BBVA (Spain), ABN-AMRO (the Netherlands), BNP (France), ING (France & the Netherlands), MKB (Hungary), Skandiabanken (Sweden) and Alior Sync (Poland).

The same pattern can be observed in the other parts of the world.

These trends demonstrate that the question is not if but when a bank will adopt PFM – it’s simply a matter of time.

However, banks are still facing a major challenge: low PFM uptake.

It is not that customers are not interested - on the contrary, user interest in PFM is high. In a recent Gartner (2014) consumer survey, over 50% of respondents who were not currently using a PFM tool expressed interest in accessing those capabilities. Moreover, 63% respondents preferred PFM from their primary bank.

So why has PFM adoption been so weak?

There are many reasons, which will be scrutinized in upcoming posts. What can be said here is that uptake depends heavily on the PFM strategies that banks choose.

I am reminded of the words of a former BBVA CEO when asked about his PFM expectations:

“BBVA is not worried about the number of new customers or increase in revenue that PFM initiative could bring. The bank’s focus is not to lag behind in the race to the bank industry of the future. Those who don’t go forward become losers.”

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Artak Vardanyan, Product Marketing Manager
Artak Vardanyan, Product Marketing Manager

Responsible for PFM, BFM, CLO and Recommendation Engine product lines including defining product development strategy, developing sales collaterals including value propositions, and helping banks to do PFM right.

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