What's the difference between personal financial management tools and mobile banking? Increasingly, there is none.
Bankers have long hesitated to offer smartphone-based financial advice tools, such as savings goal meters and budget monitors. Instead, the conventional wisdom has been that, beyond customer alerts, the wise move is to avoid cluttering with PFM features a device as short on real estate as a mobile phone.
The qualms are based on a number of uncertainties: whether mobile phones have the necessary number-crunching power to run PFM functions quickly; whether the features would offer value if customers failed to keep tasks like budgeting up to date; and whether there's even a market for such tools, given that online banking PFM adoption rates are generally in the single digits.
In recent weeks, avoidance has been evolving into acceptance among a handful of financial services companies that are targeting millennials. Central Bancompany in Missouri and fintech giant FIS, for instance, have introduced mobile phone-based software that lets consumers tag transactions or set aside funds for a goal features typically associated with PFM. The services work by connecting a mobile app to a bank account or prepaid card.
These financial services companies are attempting to defend their turf against quasi-banks, such as BBVA's Simple and Moven, which are already far down this road. To do so, they're trying to create experiences in which PFM fades into the background the same way Uber makes payments fade away for people hailing cabs.
For such breezy customer experiences to catch on, they must require little mental math, provide shopping advice (Can I afford that brunch today?), and occur within an existing mobile banking app.
Young consumers have grown up expecting no less. After all, for many their first forays into finance involved buying songs on iTunes. Recent research shows that more than half of millennials say they're looking to tech startups to overhaul the banking experience.
At the same time, mobile app providers are trying to provide options for members of the Type-A crowd, who don't mind inputting financial data, including cash spent or budget limits.
FIS, the world's largest fintech vendor, introduced in mid-April a mobile-centric prepaid product called GenNow that banks can label as their own product. FIS plans to go live with its first bank partner in August.
The new app comes with standard banking features like, mobile check deposit. Less typical are features that impose financial discipline. A user can lock away $20 loaded onto the card for, say, a Justin Bieber concert, so that it won't get gobbled up by a pizza party. The feature, called MoneyDrawer, is designed to serve as the lock on the piggybank to make the impulsive shopper pause. The feature is reminiscent of Green Dot's GoBank Money Vault feature, American Express's Serve "Reserve" feature and older products banks used to call holiday accounts.
Others are trying different approaches. Simple, now owned by BBVA, was a pioneer in launching a more intuitive banking app interface suited to young adults. Its "Safe-to-Spend," for example, crunches data the company already has on hand about the user. It includes information about upcoming bills and financial goals. The objective is to give users a realistic read on whether those tequila shots are likely to cause a headache of the financial variety. Moven and GoBank also bake in features designed to inform mobile shoppers about their financial limits.
One unknown is how mobile-centric PFM tools will evolve as millennials age and adopt more complex financial products, says James Wester, a research director of global payments at IDC.
"It could be that those PFM tools grow over time," says Webster. "It's something we need to track."
A more traditional bank example is Central Bancompany, which recently decided to integrate Geezeo's PFM software into its mobile banking app. The Missouri holding company for 13 banks in the Midwest is early among financial services providers in creating an experience in which a customer signs into one place to, say, tag a transaction or pay a bill. For now, the PFM features are accessed via a button labeled "money manager" within a tab.
"It's very important to integrate everything," says Matt Tollerton, who heads e-commerce at Central Bancompany. "You don't want a downloadable app for mobile RDC [remote deposit capture], PFM, or mobile wallet. You want to come to one place to get all of your financial needs met."
The idea is to keep customers, including Gen-Y members, from leaving the bank's digital properties to use another provider's tools.
The second phase of the bank's mobile plans is to plug the PFM tools into more "appropriate" places, he says. Case in point: tying a goal like "go to LA" to a savings account during the set-up process. "We want them to not know they are using PFM," Tollerton says.
The minor adjustments are part of a larger mission: fight disintermediation. "Competitors are non-banks now," Tollerton says. "As banks, we have to wake up."
That wake-up call requires finding what makes an audience want to interact with digital financial transactions.
"This is the new face of PFM. It's not just about data," says Ben Knelman, chief executive officer and founder of Juntos Finanzas. "It's about the experience. How do you frame what's going on with an account in ways that engage people?"
Knelman's California company creates software designed for arguably the hardest user group to engage: low-income consumers in emerging markets who are used to using cash. Juntos' broad goal is to track spending data for users by sending them text messages meant to inspire savings. The experience might be as simple as reminding customers of their bank account credentials something they could fear to ask a bank, says Knelman.
"In the U.S. there is a huge opportunity to invest in the design of good front-end customer experiences," he says.