After years of talking about it, 2015 was the year the financial industry finally realised that Personal Financial Management (PFM) 1.0 is dead.
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Since the mid 2000s, when Microsoft launched Microsoft Money, companies have tried – and failed – to provide an offering that customers want. The result is that take up has been much lower than expected.
It’s not surprising when you think about it. Its biggest drawback was lack of automation. Each PFM offering has handed the lion’s share of the work to the customer, expecting them to manually enter their incomings, outgoings, transactions and savings goals. The effort involved goes against the mindset of the human race. Nobody wants to do it.
It also fell down because it never really cracked the user experience for the interface. Banks’ interfaces are just front-end representations of what is still core transactional software that’s been there since the very beginning. They’re out of date and work largely on a ledger basis because they’ve been designed by accountants for accountants. Today, consumers are constantly being engaged by funky new apps with cool log ins, simple and intuitive user journeys and cool designs. Name a single bank that offers that to their customers?
The industry has spent a lot of time and money flogging what they now realise is a dead horse, but that doesn’t mean that all hope is lost. 2016 will be the year of PFM 2.0 and this is where things get really exciting.
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By GlobalDataPFM 2.0 will learn from the mistakes of PFM 1.0. It’ll be integrated, automated, intuitive and look slick. All things that make life genuinely easier for customers, and all things that will actually encourage them to educate themselves about their own finances. Exactly what PFM 1.0 has failed to do.
So that middle band of customers, that are currently of no worth to banks, can gradually move up towards private banking and wealth management. And become customers that don’t just live within their means from month to month, but who actually start to save. Then you have a customer who is in need of a ROBO account so those savings can then be invested, making the customer profitable for the bank.
But my interaction with my money isn’t where PFM 2.0 ends. Because I think the key thing in the next wave of innovation is contextual awareness. It’s not just key, it’s vital.
If I use my phone to look for a new car, and I then walk onto the forecourt of a car dealership, the bank should engage at that point. It knows my shadow limit, it can see that I’ve been looking at cars and now it can see I’m at a car dealership, so a push notification should pop up on my phone telling me what loan amount my bank will give me. I don’t even have to open an app or ask. What’s more, I should then be able to scan the VIN and check the HPI and even be told what that car is worth. As a customer, that puts me in a much stronger position to negotiate with that slippery salesman.
And if the bank can see where I’m transacting, it should send me offers for merchants with similar interests.
Aggregator services like Yodlee are making positive moves in this arena, but their platform is still too static. The contextual element has to be introduced and the analytics of this financial game have to change. Fast.
When that happens, and it is happening, it could make 2016 the year that PFM has been waiting its whole life for.
