I’ve never had a budget.
Sure, I kept track of my spending by looking at my transactions on my smartphone and ensuring I had enough money in my account to make a purchase, but no detailed plan or idea of exactly where my limited college kid income went, no long-term savings goals.
I dabbled with simple Excel spreadsheets and personal financial management (PFM) tools, but none of them stuck. I found the process too tedious, especially with a full course load and a 30-hour per week job.
As long as I had a bit of money in my account, I felt I was fine. “If I’m not broke yet, why bother with it?” I reasoned.
Apparently, many people who used a PFM tool shared my views, according to a recent study by Celent covered on this website recently.1 The amount of work outweighed the benefits, so only those who drew enjoyment from managing their finances strictly used the application.
In fact, a Gallup poll found that only 32% of Americans even have a budget, and merely 30% have developed long-term financial goals for their savings and investments2—much less used a PFM tool. This information indicates the majority of people across all generations simply are not terribly interested in putting effort into their finances, no matter how simple tools such as Mint or PocketGuard make financial management.
Enter the PFE
A new financial tool promises to take PFM to a new level: a Personal Financial Experience. Instead of functioning as a glorified check register, PFE tracks transactions on all accounts across multiple financial institutions automatically, and can even alert consumers to habits that may lead to overspending. For example, if a consumer walks into a store, they may receive a push notification informing them that they have tended to overspend at that establishment.
So, will the Personal Financial Experience prove a flop like its predecessor? Or is the financial industry onto something? And how will the influential millennial generation receive this tool?
At first glance, PFE seems like a product most people, millennials included, would pick up in heartbeat. The key feature, in my opinion, is the ability to aggregate all accounts from multiple financial institutions into one place.
This concept is nearly a decade old, however. Apps like Mint, PocketGuard, and Mvelopes all aggregate account information, although the user is first required to sync the accounts to the app by entering their username, password, and other relevant information. Yet, PFMs still failed to gain popularity and maintain a high usage rate.
PFE promises to make financial management effortless, a process almost completely without any input from the consumer. Will consumers find the sudden “splurge alerts” when they near a frequently visited merchant irritating or insightful, though?
Whose life (and money) is it, anyway?
It’s difficult to envisage how consumers will receive PFE, but I decided to take a look at similar technology to form a prediction. I took the matter in pieces.
• Privacy. One of the foremost obstacles facing the successful adoption of PFE is the privacy factor. In order to send a “splurge alert” or other relevant notifications, the application must know the user’s location.
A 2012 Pew Research Center study showed that only 30% of smartphone owners turned off their location tracking services because they were concerned about their privacy.3 Another 2016 Pew study showed that 90% of smartphone owners used their devices to receive directions or information related to their geographical location.4
Despite wide fears of privacy breaches, this data indicates that consumers are not excessively concerned with a violation of their privacy due to applications tracking their location, especially if the application is performing a valuable service.
• Possible, but desirable? Next, do consumers even want a tool that can help them make better financial decisions?
As previously indicated, most Americans don’t much care about their budget, but will they take more of an interest in their finances if technology performs the heavy lifting and makes budgeting automatic?
According to a Harris Poll survey, only 22% of consumers would use an online application for financial guidance, yet 55% would be very to somewhat likely to follow the advice given by an online tool.5 The same survey found that consumers were even more likely to use a financial professional (37%); friends or family (34%); or a financial institution (32%) for guidance.
I find that to be rather conflicting information, but I drew the conclusion that consumers may not want to put the work into the tool themselves, but will readily take any advice an application (or person) automatically generates for them.
A PFE may be just the thing, especially for tech savvy and banker-wary millennials.
• Trust factor. Millennials are the most in need of financial advice, but they are often mistrustful of financial professionals.
A Deloitte study showed that 84% of millennials want financial advice, and 82% would like more personal meetings.6 It’s well documented that millennials also value convenience.
I mean, how much better could it get for a millennial when their own personal financial advisor recommends they skip the latte since they’ve had one every day this week? Or suggest investment options for the holiday bonus they just deposited? Or recommend products from your financial institution that fit your customers’ current needs and behaviors?
A seemingly passive PFE only existing on their phones could bridge the gap between millennials wanting and needing financial advice and their inherent distrust of financial professionals.
• Listening to a financial “conscience.” Finally, I considered if consumers would even pay attention to an application sending them reminders to watch their spending at retailers, contribute to their savings, or ease up on the take-out.
Currently, few financial institutions utilize push notifications.
A Javelin study discovered that although 45% of consumers would be interested in push notifications and find them useful, only 14% receive them.7 Additionally, an Urban Airship study found that push notifications from financial applications earned an approximate 40% opt-in rate.8 The study found that push notifications often boosted customer engagement and retention across all industries, especially if they receive targeted messages based on location or their interests. This information indicates that consumers would be fairly receptive to the type of preemptive services PFE offers.
My conclusion: If a Personal Financial Experience can deliver value, automation, and relevance, it could succeed tremendously where Personal Financial Management failed.
Does PFE fit your bank?
Now, how will offering a Personal Financial Experience benefit your organization and attract customers? One of the primary reasons for offering PFM tools was to increase customer engagement, but it didn’t quite meet expectations. PFE promises to grow customer engagement, and, like many financial technology advancements, not offering PFE is more likely to hurt your organization than offering PFE.
Additionally, PFE affords your financial institution an opportunity to target customers and sell your products, as well as build a relationship with your customers—on their own terms, of course—by providing them information and tips regarding their financial health.
PFE is coming. Best be prepared to implement it at your organization.
1. “As ‘PFM’ fades, ‘PFE’ steps in,” Banking Exchange, last modified Aug. 3, 2017, accessed Aug. 23, 2017
2. “Compare your finances to financial statistics for the average American household to see how you stack up,” Debt.com, last modified 2017, accessed Sept. 8, 2017
3. Jan Lauren Boyles, Aaron Smith, and Mary Madden. “Privacy and Data Management on Mobile Devices,” Pew Research Center, last modified Sept. 5, 2012, accessed Sept. 14, 2017
4. Monica Anderson. “More Americans using smartphones for getting directions, streaming TV,” Pew Research Center, last modified Jan. 29, 2016, accessed Sept. 14, 2017
5. Harris Poll. "The 2017 Consumer Financial Literacy Survey," The National Foundation for Credit, last modified March 13, 2017, accessed Sept. 14, 2017
6. Benjamin Ernst, Felix Hauber, and Dr. Daniel Kobler. “Millennials and wealth management,” Deloitte, accessed Sept. 15, 2017
7. Michelle Crouch. “Push notifications: the future of bank communication,” Nasdaq, last modified July 2, 2015, accessed Sept. 14
8. Press Release. “New Urban Airship Study Finds Massive Difference in Notification Opt-In Rates,” Urban Airship, last modified April 15, 2015, accessed Sept. 15, 2017
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