The truth about PFM
15 April 2014
Many analysts and digital channel managers believed that PFM was the next big thing in online banking and that it would be adopted by banks in a very short time. Now in 2014 the reality is somewhat different - the bubble didn't burst, but it deflated a little.
PFM (Personal Financial Management) has been in the market for more than a decade now. In its early days PFM didn't receive much attention from the market. Then, after Mint.com's success, PFM was resurrected.
Since that time, various research findings confirmed that users are ready to embrace PFM. The market got the signal. Many analysts and digital channel managers believed that PFM was the next big thing in online banking and that it would be adopted by banks in a very short time. In 2010, Online Banking Report even quoted that: "Personal Finance Management (PFM) functionality is the highest potential ROI project for retail financial institutions to implement".
Now in 2014 the reality is somewhat different - the bubble didn't burst, but it deflated a little. There are banks who adopted PFM and are successful. They are fulfilling the promises of PFM. And then there are the banks who couldn't achieve the results they hoped for with PFM and have poor adoption rates. There are many reasons why some banks succeeded and others failed which I won't cover in this blog. This topic deserves a special attention and will be scrutinized in one of my coming blogs. However, what I can conclude after several years of PFM research and observations is that: the number of banks that adopt PFM has been growing steadily in the last few years and this trend is very likely to continue in the years to come.
For instance, in the United States, which is as usual a forerunner in innovation adoption, one in five leading banks have PFM in place. Arguably, the credit crunch provided users with a fresh impetus to get control of their finances. To name a few: Citigroup, Bank of America, Wells Fargo, HSBC North America, PNC and ING. Additionally, there are hundreds of Credit Unions which have embraced PFM to differentiate themselves and meet the changing needs of their consumer.
Europe started late and slowly, but in the last two years PFM implementations have more than doubled. At the moment around 30 leading banks across the continent have PFM in place. To name a few: Erste Group, UBS (Switzerland), Lloyds & Barclays (UK), BBVA (Spain), ABN-AMRO (the Netherlands), BNP (France), ING (France & the Netherlands), Islandsbanki (Iceland), MKB (Hungary), Skandiabanken (Sweden) and Alior Sync (Poland).
The same trend can be observed in the other parts of the world. One important catalyst for this is the fact that online propositions are becoming commoditised and many banks are looking for new value added services to differentiate their offers. PFM is the right tool for this. It is the next logical step in online and mobile banking. This is why I think the question is not whether a bank will adopt PFM or not. The question is WHEN?
As a concluding note I would like to mention the words of the CEO of BBVA on PFM when he was asked about his PFM expectations:
"BBVA is not worried about the number of new customers or increase in revenue that PFM initiative could bring. The Bank's focus is not to lag behind in the race to the Bank industry of the future. Those who don't go forward, become losers."