Enlarge This ImageOnce a luxury, personal financial management tools are fast becoming a necessity.
Consumers and banks alike are driving the transformation, bankers and vendors say. Consumers — particularly younger ones who may never have touched a check register — are increasingly expecting a more interactive online presentation of their finances. And banks find that PFM provides vital data — a more complete view of a person's financial life — that can help them cross-sell.
In the past banks would get such insights when people went to branches to ask about new products. Today most consumers do their research online, said Alex Sion, the vice president of digital strategy and financial services for Sapient Corp., a provider of marketing technology.
"They just don't come to visit you anymore," Sion said. "You've got financial firms that need to reconnect with customers … but they're no longer seeing them."
With personal financial management tools, customers bring in financial data from other financial institutions and can manipulate their view of that data, such as by looking at their entertainment spending across multiple credit and debit cards.
Sapient hopes to fill these gaps in the data available to its marketing software by working with Geezeo Inc., a PFM provider that is reshaping itself as an online banking provider.
This trend of consumers doing more research online has also driven much of the strategy at Intuit Inc.
Intuit has been particularly bold in its PFM strategy this year, with its November purchase of the free-to-consumer PFM provider Mint Software Inc. and its continued updates to the FinanceWorks PFM service that it offers through financial institutions.
Albert Ko, the senior vice president for consumer solutions at Intuit's Digital Insight online banking unit, said that "even with the Internet, the bank has zero visibility into your financial life outside of what you choose to do with that bank or credit union." But with PFM, "that visibility is dramatically increasing," he said.
According to at least one bank, PFM and online banking are no longer distinct products.
PNC Financial Services Inc. describes its Virtual Wallet, a series of interconnected bank accounts presented in a graphical format online, as what online banking would look like had it been designed today from the ground up.
The accounts that make up Virtual Wallet cannot be opened separately, and they cannot be viewed in a conventional online banking table of accounts.
Mike Ley, a vice president in PNC's payments and e-business group, said people are "used to interfaces like iPhone, iPod, drag-and-drop — and they just expect their bank to be that way: be more visual, be more intuitive. That's why we built it this way."
Consumers in Virtual Wallet's target market of 18-to-34-year-olds don't think of their money in numeric terms, Ley said.
They think of it as "buckets" devoted to certain expenses and savings goals, and they want to money from one bucket to another as needed and to see that movement, he said.
PNC's strategy with Virtual Wallet is to provide it to young customers and then have the account grow up as those customers grow up.
"You start developing good money management skills at a young age, then those carry forward," Ley said.
"We're looking at what we can do to continue to grow with them."
Though most of Virtual Wallet was built in-house, its spend-tracking feature was built on technology from Yodlee Inc., a company that has a similar vision of "drag-and-drop" online banking.
