Credit unions understand and embrace demand for PFM tools.
PFM tools are hardly new. So what makes PFM such a hot topic for 2010? A perfect storm of three trends and factors.
Demand. The state of the economy has forced people to become a lot more disciplined about managing their finances.
Supply. NetBanker estimated that 10 new PFM sites launched in the month of September 2008 alone. In 2009, even more PFM sites emerged, and thousands of personal finance apps have become available for Apple's iPhone.
Demographics. Gen Yers are more involved in managing their financial lives than previous generations were at Gen Yers' age. Just as importantly, however, Gen Xers (in their early 30s to early 40s) are reaching the prime of their money management years, trying to pay off student loans, buy homes, afford cars and save for college and retirement.
These trends haven't been lost on credit unions. Credit unions lead large banks in terms of PFM deployment. Just 5% of large banks currently have PFM functionality on their sites, in contrast to nearly one in four credit unions. And of those credit unions not already offering it, 60% are in the process of evaluating PFM tools and providers.
The results of a survey of nearly 1,000 PFM users conducted by Aite Group shows that PFM is having a strong impact on users' financial lives. Roughly three-quarters of PFM users say that it has given them a greater sense of control over their financial lives. About four in 10 save more money as a result of using PFM tools, and about one in five pays less in late fees on credit cards or overdrafts on checking accounts.
From a credit union's perspective, there are benefits, as well. A quarter of PFM users say that they're less likely to close out their accounts and switch to another bank or credit union, while 17% have increased their account balances as a result of using PFM. In addition, many PFM users are more likely to consider their credit union for future products, and more likely to recommend their credit union--all as a result of using PFM tools.
Despite the benefits to both members and the credit union, many credit union executives are skeptical. Three objections are commonly raised.
"No one is asking for this." A variation on this objection is "these tools have been around for a while and nobody uses them." Nobody asked for the iPod, either. That product wasn't born from research that found consumers clamoring for an iPod, but from Apple's vision of how consumers could buy and manage their music.
"If we have to choose between investing in PFM or mobile banking, we'll go with the latter." This isn't an either/or decision. New channels arise and banks need to invest in them to keep up. Investing in PFM is about adding a new kind of value to the customer relationship--one based on advice and guidance in managing one's financial life.
"People won't aggregate accounts at a credit union's site." Account aggregation is not necessarily a prerequisite for using PFM. Many PFM users are mostly Gen Yers and Gen Xers, who are heavy users of debit cards. Linking only a checking account to the FI's PFM site should provide enough data for the bank to provide advice and guidance and demonstrate the value of a PFM offering.
Many of today's PFM tools are limited to budgeting, expense categorization and charting/graphing capabilities. The future of PFM is as a broad platform to help members manage their financial lives. To make PFM a platform for member engagement, credit unions should:
Make PFM social. Consumers like to see how they stack up and compare to their peers. PFM tools will let members compare their spending levels and allocation to other members, and give members the opportunity to network with each other to better manage their finances.
Make PFM rewarding. A few credit unions have begun to experiment with Foursquare, which rewards customers for "checking in" at merchant locations. Instead, they should focus on rewarding PFM behavior like establishing a budget, categorizing expenses, keeping within their budget, answering other members' financial questions, etc.
Make PFM educational. Providing educational content has been the focus of many credit unions. But this content is often generic, and not integrated with members' specific needs and wants. PFM will become a platform for integrating educational material into members' online experience.
Ron Shevlin is a senior analyst with Aite Group. He can be reached at 617-338-6045 or email@example.com
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|Title Annotation:||GUEST OPINION|
|Publication:||Credit Union Times|
|Date:||Jul 21, 2010|
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