Don't consign personal financial management apps to the ash heap of technology just yet.
Granted, on Thursday Prosper Marketplace is discontinuing Prosper Daily, an app formerly known as BillGuard that helped users monitor their finances and credit scores. And the next day Capital One Financial is set to close the money management app Level Money.
Yet some observers say the end of those stand-alone apps is part of an inevitable shake-up in a crowded market, and they remain upbeat about the future of digital PFM services.
The trick will be in convincing many skeptical bankers to keep experimenting with these technologies. Historically, banks that have offered PFM technologies have failed to win over enough users to make them succeed.
“Ask many financial institutions today about PFM, and many will say it’s unnecessary, unutilized, unwanted, and, increasingly, dead," Stephen Greer and Daniel Latimore of Celent wrote in a research report in July. "Many vendors confess that the name PFM can stop a sales conversation dead in its tracks.”
To Greer, the biggest reason why PFM flopped is because it required too much effort by users, and often delivered depressing news like “you’re broke.” As Greer told American Banker, “Financial management for most people is not very fun, and at times, very dismal.”
PFM could bounce back, Greer said — but only if the experience greatly differs from years past. Rather than burying the services in the abyss of a tab in online banking, PFM services should become a timely, integral part of the banking experience such as mobile alerts or informed suggestions by branch employees.
Signs of the rethinking are already there. Capital One sends customers alerts when it thinks they have been hit with double charges. Wells Fargo is testing a digital dashboard that will let consumers see where they shared their financial data. KeyBank acquired HelloWallet, a technology company that spits out financial health scores. In August, Strands, a PFM vendor, announced its first bank partner in the U.S., Huntington Bancshares of Columbus, Ohio. And the rise of chatbots holds additional promise at revolutionizing the services.
Efforts to rebrand PFM — as one's "personal financial experience" or "financial health and wellness" — could help, too.
Greer predicts that PFM, round two, will help banks engage more often with their customers and secure more cross-selling opportunities as they build trust.
Data-sharing trends could provide a helpful push. Europe is gearing up for a mandate that makes consumer data more portable among financial institutions or between them and fintech apps. While the U.S. has yet to adopt similar regulations, many expect banks to follow suit to stay competitive. Case in point: While investing in APIs to help bank account data flow to Intuit products might have seemed laughable in past years, some of the biggest banks like Wells Fargo and JPMorgan Chase have done so in recent months.
“The envelope is being pushed by what is the industry standard,” Greer said.
Cesar Richardson, vice president for Strands America, said the first version of its product for Huntington will roll out early next year. The bank will also make the technology available to small-business customers who could, say, get an alert that cautions them they are about to run out of cash by a certain day. The new features will not get buried within the login screen, he said.
“There’s no separate path,” Richardson said. “It’s inside your day-to-day banking.”
In cases where the tech may share negative news, Richardson sees an opportunity for the message to trigger customers to come into the branch for face-to-face conversations.
KeyBank, which has offered its retail customers a financial wellness app since 2015, has already found that HelloWallet is one of the main talking points within its branches. Branch employees are happily promoting the tool that spits out financial wellness scores, recommendations on what to do to improve them and alerts when consumers are spending more than what they are making.
“Our people come to work every day wanting to do great things for our clients,” said Dennis Devine, head of KeyBank’s consumer and business banking segment. “When they have an ability to do that in way that is easy, simple and entirely client-centered, they run with it.”
The HelloWallet tool already counts hundreds of thousands of users, said Devine, who insists it is more viable than past efforts by banks. “This is not just another personal financial management tool,” Devine said. “It is just not a tab in online banking.”
Manish Grover, author of "Connected! How #Platforms of Today Will Become Apps of Tomorrow," has an even bolder vision of how PFM ought to evolve. Grover sees a world where banks are crunching transaction data across various bank accounts, and more notably, various industries. Imagine a bank sending an alert that cautions a person to avoid buying something on Amazon in order to meet one of his longer-term goals. “That’s where PFM is supposed to go, but it is not there,” Grover said.
Banks must take baby steps over a long period of trial and error. As Grover put it, “One innovation leads to another.”