Banks are taking greater control of the personal financial management market as the third-party vendors that defined the space increasingly find they must work with banks to survive.

Over the course of 2010, many pioneers in the PFM field either shut down or changed their model to place less focus on providing an independent service that is free to consumers. Nevertheless, their run has shown banks that their customers want to do more than they are able to with the rudimentary online banking systems most offer.

PFM "is absolutely central to our online strategy," said Joy Marshall, senior vice president in the Internet services group for Wells Fargo & Co. "We are focused in … [2011] on fundamental improvements to the customer experience that will let the PFM tools be more accessible to a broader customer base."

Analysts said other banks need to adopt this view, because there is still a chance that newcomers can overtake the PFM space if banks do not press their advantage.

"At this point, online financial management is the banks' and credit unions' game to lose," said Cathy Graeber, the founder of the consulting firm Swimming Upstream.

PFM goes a step beyond online banking by giving users the tools to chart and budget their spending. Most offerings also import data from multiple bank sites, giving users a fuller view of their finances than they get from any one institution.

Even today, much of the innovation in this space still comes from third-party players, and banks cannot discount them as they attempt to bring new services to their own customers.

"Banks can't rest on their laurels," said Mark Schwanhausser, senior analyst for multichannel financial services at Javelin Strategy and Research. Companies like Intuit Inc. and Paypal Inc. have "opportunities to disintermediate and take away big chunks of business from the banks, who need to find ways to bring people to the online channel."

Wells Fargo led early in 2005 with My Spending Report and followed that in 2006 with My Savings Plan. It added another tool, called Budget Watch, to My Spending Report in 2008. Wells is working to streamline these spending and budgeting offerings, and last month it combined them into a single product. Wells also recently announced it was adding a feature called Cash Tracker to its ATMs, which helps customers track how much cash they are withdrawing each month.

In the coming months, Wells plans to more tightly integrate its PFM tools and make them more intuitive. "To the extent the tools can operate on autopilot," they will, Marshall said. For example, Wells' PFM tool can automatically categorize customer transactions across all product lines.

PNC Financial Services Group Inc. set an industry standard with its Virtual Wallet, introduced in 2008. The three-in-one account combines checking with short-term and long-term savings, displayed in an intuitive and visually appealing way that many industry observers described as game-changing. (PNC declined a request to be interviewed for this story.)

Bank of America Corp. has plans to streamline and integrate its My Portfolio PFM offering, coinciding with a broader redesign of the company's website.

"Online banking is part of PFM, and the concept of PFM is driving everything we do," said Dottie Yates, senior vice president in charge of online and mobile channel planning and design at B of A.

In October the bank simplified the look of BankofAmerica.com, removing confusing links and categorizing activity and products into big, bold tabs like "Bank," "Borrow," "Invest" and "Plan." The PFM program will follow suit. "Now it is about putting a new design and more intuitive and cleaner design around [those] capabilities," Yates said.

Perhaps the most well-known PFM shutdown in 2010 was Wesabe Inc., though lesser-known competitor Rudder Inc. also closed and Intuit axed an in-house PFM offering called Quicken Online.

The main reasons for Wesabe's failure, according to industry observers, was its refusal to consider ad hosting or lead generation as potential sources of revenue. According to one of the company's founders, Marc Hedlund, Wesabe also was unable to attract a large enough audience and did not have an adequate sales force on hand when it finally decided to sell its software to banks.

Wesabe "was another case where [a PFM company] had not thought out the business model and shied away from saying, 'We will let banks and credit unions license our product,' " Graeber said. "They could not build a direct-to-consumer brand in a way to get enough eyeballs, and figure out how to monetize this."

To compensate for its minimal sales force, Wesabe tried to automate its sales process by listing its pricing and features online. Bankers could pick a PFM system as casually as consumers might choose a plan on Netflix. Hedlund later said this approach was a poor fit for how banks handled their technology spending decisions.

Like Wesabe, other vendors switched from a free-to-consumers approach to selling software to banks. Geezeo Inc., in Tolland, Conn., for example, largely shut down its consumer site to pursue this new model.

"Our long-term business strategy was geared toward the institutional market, but we started with consumers to test products and get user feedback and vet the viability of the concept," said Peter Glyman, the president and co-founder of Geezeo.

About a year and a half ago the company discovered through a survey of its user base that 80% of its customers preferred to use PFM tools at a bank site, rather than a third-party provider.

As part of its new strategy of courting banks, Geezeo designed its technology platform to do more than just improve the end user's online banking experience. It also lets financial institutions mine a customer's PFM data for marketing opportunities. Currently Geezeo has 13 clients, primarily credit unions with assets between $500 million and $7 billion.

"We are betting everything that financial institutions are committed to incorporating PFM into short- and long-term strategies and that customers will expect these tools from their financial institutions," Glyman said. As with online banking, those banks that initially resisted PFM now must play catch-up, he said.

One of Geezeo's clients is Unitus Credit Union in Portland, Ore. The $820 million-asset institution incorporated PFM into its online banking offering in August. It has 68,000 members.

Laurie Kresl, vice president of planning and business development for Unitus, said a number of vocal members who had been using Intuit's free consumer PFM site, Mint, and other PFM tools asked if the credit union could incorporate something similar into its online banking suite. Unitus licensed Geezeo's product and branded it Total Finance. "Members were talking about how to get a better handle on their finances," Kresl said, adding that many customers said they wanted the credit union to serve as the repository for a tool that would help them consolidate their financial picture. So far, Unitus has signed up 500 members for Total Finance, for which it charges $2 a month, after a 30-day free trial.

Third-party providers remain some of the strongest innovators in the mobile category, which some analysts predict will explode in the near future.

At issue is the changing nature of online banking. As younger consumers enter the market, they will want more interactivity, more mobile applications and a social component, observers said.

In the near future, "PFM becomes online banking," said Jacob Jegher, senior analyst for Celent. He predicted that PFM will ultimately have rich graphics, a dashboard presentation with information about consumers' financial positions and analytical engines built around transactional functions. "From a relationship perspective, PFM will be the most important" thing for banks.

Whether it is banks or independent third-party providers that create this new world remains up in the air. Nascent demand for mobile payments could throw another curve ball at the banks.

Third-party vendors are positioning themselves to compete in ever more novel ways. Bundle Corp. and Intuit's Mint, for example, mine aggregated data and offer services that show consumers what they are spending compared with peers. Intuit also built a PFM offering called FinanceWorks from its online banking unit, the former Digital Insight.

"What you will see is the evolution and merging of online banking and financial management," said Albert Ko, vice president of consumer solutions for Intuit's financial services division.

Pageonce Inc. in Palo Alto, Calif., has positioned itself to capture the mobile trend. Though it allows users to sign up online, it directs them to a mobile device for the full PFM experience. Pageonce launched its system in June 2008 and has 3 million users. Its app consistently ranks among the top 10 of mobile apps for all smartphones, the company said. "Our intent is to move away from just letting people view their finances, and to move toward doing things like transacting and transferring money," said Steve Schultz, Pageonce's chief operating officer. "This is the next wave."