Goodbye PFM, Hello PFE (Personal Financial Experiences)

Goodbye PFM, Hello PFE (Personal Financial Experiences)

Personal Financial Management – PFM – has been a worthy goal pursued by many providers, yet consumers continue to ignore its possibilities. Rather than trying to incrementally expand the share of 10-12% of PFM users, banks should instead focus on the next stage in the evolution of personal finance: Personal Financial Experiences, or PFE.

We’re big fans of PFM (Personal Financial Management)…conceptually. We think that it has the potential to help people better control their finances and live happier, less-stressed lives. And yet, despite numerous efforts over the years, traditional PFM has not gained significant marketplace traction. It’s too cumbersome and inconvenient, while crucially often serving up bad news – and who wants that? At the same time, banks have recently begun to focus wholeheartedly on the customer experience of their clients, seeking to improve and coordinate the various interactions that consumers have across multiple and diverse touchpoints.

The convergence of these two trends is PFE, defined as A coordinated set of customer interactions that pushes and provides customers relevant, timely information and advice to enable them to live more informed and proactive financial lives. PFE gives customers the ability to access whatever level of financial detail they want, but focuses primarily on context and appropriate accessibility.

A variety of companies – both banks building their own, and vendors focused on developing white-labeled software – have created a wide range of PFM approaches. Most have historically required a fair degree of intentionality on the user’s part, and treat PFM as a discrete activity – a separate tab or a standalone app, for example. PFE changes that. Users will experience PFE without ever having to call it up; it will just happen to them via an alert on their mobile, an idea from a branch representative, or an unexpected landing page on their laptop. The “E” stands for Experiences, plural. PFE isn’t just one touchpoint; it encompasses the wide variety of interactions that a consumer has with her financial institution. Today’s Digital banking will, in fact, become PFE. When banks move to the end-state of PFE, customers will no longer have to choose to manage their financial lives (or by not choosing, default to unmanaged ad-hocracy); instead, financial management will happen in the background, facilitated and orchestrated by the bank, as part of the overall relationship.

Three key principles provide the foundation of a robust set of Personal Financial Experiences.
1 Automatic: Users don’t have to put much conscious thought or effort into entering the data or even asking for guidance. The system gathers that information and proactively provides nuggets of advice and discrete, concrete calls to action.
2 Intuitive: There is no learning curve. Just as kids can start using a new mobile phone out of the box without reading any sort of manual, PFE will be intuitive and user-friendly. PFE becomes normal digital banking.
3 Relevant: PFE will deliver only the information needed at the appropriate time. No longer will a user be confronted with a huge dashboard of charts and dials confusingly presented. Relevance and contextuality will rule.

The iPod wasn’t the first MP3 player; it built on and refined pioneering work done by others. So, too, is PFM the first step in the journey to PFE; we’re not there yet, but we’re well on our way, helped by advances in technology and the incremental changes that FI tinkerers continue to make. We’ll be exploring this concept in greater depth over at celent.com; please check back in, or reply to this post, if you’d like to learn more.

A Millennial’s Home-Buying (and Mortgage) Journey

A Millennial’s Home-Buying (and Mortgage) Journey

At Celent we take a very customer-centric view of the banking experience. My husband and I recently relocated and bought a new house. As first-time home buyers, we were nervous about the biggest purchase of our lives. Where do we start? How much will it cost? How do we know what type of loan is right for us? Before I start, there a few things you should know about us.

  1. We’re millennials, for better or for worse.
  2. Like most millennials, we are fans of online/mobile banking and rarely step inside a branch. In the last few years, I’ve only been to a bank branch a handful of times.
  3. We both have very good credit (mid 700s) and had enough saved up to put 20% down to avoid PMI. Anyone else who has gone through this process knows that these factors can strongly impact which lenders will approve your loan. So even though this was our first major loan, we were considered relatively low-risk.
  4. We have a fee-only financial advisor who I’ve been using for the last 10 years.

One piece of advice from my financial advisor that stuck with me was, “As tempting as it is, don’t just go with the lowest advertised rate you see on the side pane of Zillow.” He warned me that interest rates are only one of several factors to consider when shopping for a mortgage and that those ads are only giving you one piece of the puzzle. This advice stuck with me because that’s exactly how I had been shopping for mortgages! Clearly, I had no idea what I was doing.

As I got further into my shopping experience I quickly learned that those low advertised rates obnoxiously flashing in a pop-up window were rarely the rates you were actually quoted. This is especially true if you are young and a first-time mortgage customer. In fact, some of the actual rates I was quoted were almost double the advertised rate. Many other lenders just simply never got back to me or made it difficult to reach a live representative.

One of the things I valued most was customer service, including the ability to talk to someone without going through a million different menu options only to be put on hold for 20 minutes. Like many others in my age group, I don’t like talking on the phone; I prefer communicating via email and text. This, though, felt different. I felt like I needed much more handholding and someone to explain all of the legal jargon in this daunting process.

My financial advisor suggested I reach out to Wells Fargo since many of his other clients have had pleasant experiences with them. I took his advice and requested an application for a Wells Fargo mortgage, and I received a phone call the next day from one of their home mortgage consultants. Right away, I noticed he had a kind and personable demeanor, and about 15 minutes later, I was preapproved for a loan. During our conversation, he explained how the mortgage process worked and introduced me to this handy online tool they call yourLoanTracker.  

Figure 1: yourLoanTracker Homepage

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Source: Wells Fargo

Basically, it tracks the loan’s progress and acts as a portal for everything related to the loan: documents, disclosures, contact information, due dates, etc. If there was something I needed to sign, I could digitally sign the document via the portal. The mobile app was another feature that I found somewhat helpful, but was mostly there just to provide an easy way of seeing the loan’s progress on the go. There was also the option to receive text and email alerts when I had a new “task” on my to-do list and to remind me of approaching due dates.

Figure 2: Mobile Alerts and Apps

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Source: Wells Fargo mobile app

A few “closing” remarks (no pun intended!):

  • We were not and still are not Wells Fargo banking customers, and aside from recommending a few products during our initial conversation, I appreciated that we were never aggressively cross-sold or pushed to open a checking account.
  • About 75% of the entire process was done digitally. We never visited a branch or talked to anyone in person; everything was done either digitally or over the phone. While some may prefer in-person visits, I found that phone conversations were more than sufficed.
  • After closing, our consultant called to ask how everything went and if we were happy with our experience (a nice personal touch).
  • Our actual interest rate was only two-tenths of a percent higher than what was advertised, and they were up front about all fees. In fact, we paid less in closing costs than what they initially quoted us.
  • We closed on time, just under eight weeks after being preapproved.

While Wells Fargo didn’t have the lowest rates, the combination of digital tools and customer service was worth the slightly higher rate. Yes, simple touches like customer service and communication are valued even among millennials, particularly when they’re going through something new and complicated! Shocking, right?

 

The importance of customer experience in financial services

The importance of customer experience in financial services
Service Design. Journey Maps. Customer Stories. Mood Boards. Experience Recovery. These are a handful of the topics discussed at this week’s Customer Experience for Financial Services (CXFS) Conference, organized by Worldwide Business Research in Charlotte, NC. As an analyst currently immersed in research on corporate banking financial performance, regulatory environment, economic conditions, business demographics, and financial technology, the CXFS event was a welcome change of scenery.
Journey Mapping

Journey Mapping

The CXFS conference was all about the “voice of the customer” (VoC) and how financial institutions (FIs) can improve their customer “listening” skills. One of the sessions mentioned that FIs are listening to anywhere from four to ten channels including web site, call center, e-mail, Internet, customer surveys and social media. But as one presenter stated, having more VoC channels doesn’t automatically result in a better customer experience. For example, in recent years many global banks fully integrated their major lines of business with product, operations and technology grouped organized under one segment leader. These integrated groups have created silos which create a highly verticalized client experience (CX), preventing consistency across a firm. Event attendees were encouraged to “climb over the silos and create a collective story to make things change”. Customer experience strategy and technology have gone a long way since I was involved in online banking user interface design in the early 2000s. Technology providers at the event are enabling banks to digitize and tag unstructured data such as call center recordings, agent notes, e-mails, and social media posts. This enables firms to mine and analyze the data to inform customer-centric innovation. Other firms specialized in market research including voice of the customer and voice of the employee surveys. Customer experience consultants are helping firms to understand how customers are thinking, feeling, seeing, saying doing and hearing so that people, processes, products and technology can be improved. The event featured discussions on how to build CX into people, processes and products by creating centralized information stores, centers of excellence, customer councils, and shared KPIs. Most of the FIs at CXFS were early in their customer experience journey and still working out a comprehensive solution. My favorite quote of the event was advice from Ingrid Lindberg, CXO of ChiefCustomer.com: “Have the patience of a saint, the heart of a lion, and the tenacity of a street fighter because it is one giant game of Whack-a-Mole.”

Banks as Coaches, not Scolds

Banks as Coaches, not Scolds
Soccer season is starting in New England, and I’m resuming my duties as an assistant coach for my daughter’s team. Just as our players strive to improve, so do I try to improve my coaching, and one of my key functions is to try to change player behavior. I do that through a variety of ways: through explaining, through modeling, and through feedback. It’s the last point that I want to focus on, because the way in which a coach gives feedback is critical, not only for the specific point in time, but for future interactions. Very simply, there are two types of feedback: positive and negative. The coach can say, “Great pass to space, Jane,” or, alternatively, “You missed Sarah on her run down the sideline, Jane.” Guess which one Jane reacts better to (and which one her teammates notice)? What does this have to do with banking? Celent (together with many banks) has been talking a lot about the need to improve and solidify the customer relationship. One way to do this is to help the customer be more in control of their finances. This can happen when the bank gives feedback. Personal financial feedback, just like soccer coaching, can be positive or negative, and just like soccer, guess which one is more effective? And yet, most banks focus on providing unpleasant or negative news: “Your account is below the limit you set” is a relatively benign example, while “Your check has been returned for insufficient funds” is a more substantial one. It’s much more rare to see positive reinforcement: “Congratulations, you’re on track for the savings goal you set.” Simple, for one, is on to this, and it, together with a host of other features, led BBVA to buy it. Monitise, too, is touting “cuddle” alerts that seeks positive occasions for bank touchpoints. A bad outcome for banks is that their customers start to ignore them because they simply don’t want to hear more bad news. “Oh, it’s my bank telling me that I’ve done something wrong. I won’t pick up / open the envelope / check the email.” Then the bank has lost almost any opportunity for enhancing the customer relationship. As a quick aside, TD Bank recently hit a home run with a campaign that went viral as it thanked customers in the most personal way possible. 4 minutes, 11.1 million views as of September 1; check it out on Youtube: https://www.youtube.com/watch?v=bUkN7g_bEAI What can your bank do to be a coach instead of a scold?

Learning from Apple Store’s Mistakes

Learning from Apple Store’s Mistakes
Apple is often cited as an excellent example of how bank branches should be – Apple Stores that is. I couldn’t disagree more. Far from a thorough analysis, let me support my disappointment with the Apple Store customer experience. I recently had need for a simple transaction. All I wanted was a new iPhone. What could be simpler? I recently lost an iPhone to an unfortunate (and easily avoidable) vacation accident. It was less than a year old and I had no upgrade credit yet with my wireless carrier. My colleague Jacob Jegher suggested that exchanging it for a new phone at an Apple Store might be the best way forward. The nearest store was 19 miles away and located in the center of a large retail mall. In Atlanta, 19 miles is a long ways away! Early afternoon round trip time was 90 minutes not including time spent in the store. I’m an advocate for lower branch densities – but not this low!
Apple Store – Perimeter Mall, Atlanta, GA

Apple Store – Perimeter Mall, Atlanta, GA

Wisely, I called the store before making the trip. The extremely friendly and knowledgeable Apple rep on the phone politely reassured me that I could have a new phone for $199 + tax as long as I still had my previous phone and was willing to leave it at the store. All I had to do was make an online appointment and check in at the Genius Bar once there. Simple enough, but why didn’t the Apple rep make an appointment for me while I was on the phone? I strategically planned an appointment on a Thursday afternoon, thinking it best to avoid weekends, particularly for a retail mall based store before Christmas. Arriving at the store, I found it a bee hive of activity. The relatively small store must have had 60 people in it. After checking in, I was asked to sit at an apparently random bar stool. Ten minutes later another Apple employee greeted me, verified my identity, confirmed the purpose for my visit and politely asked me to move to a second bar stool deeper into the store. Why couldn’t the first person meet my very simple need? Apple Store 2 After another 10 minute wait, a third Genius greeted me and repeated the information exchange I had recently engaged in with his two colleagues. He did this while multitasking – he was also helping a young lady with some technical problem. A short time later, he returned with a new phone and proceed to enter serial information into his system using, of course, an iPad. I was struck at how manual the transaction was. The box was bar coded. It could have been trivially scanned in the back-office. After agreeing to terms and conditions, the chap was ready to part with the phone in exchange for my payment. After three unsuccessful swipes on his separate iPhone based POS terminal, a re-boot was necessary. Finally, I was finished. Total elapsed time: 40 minutes. There is much for banks to learn from Apple: Apple Table

Simplicity

Simplicity
I recently spent several days in New York speaking to a host of clients, both technology providers and banks, many of whom are focused on driving adoption of new technologies.  I was struck by the consistent increased focus on simplicity in the customer experience. Why is this important?  I contend that in human behavior generally, and financial services specifically, the most powerful force is inertia: a body in motion tends to stay in motion.  To get people to do something differently, you’ve got to make it worth their while to change.  There are two components to this equation: the size of the potential benefit, and the effort required to reap the benefit. As the perceived value decreases, so too must the effort to achieve it.  Because in financial services the perceived benefit is so often uncertain, reducing the effort required to achieve it is critical. Let’s look at the Apple music ecosystem (iTunes, iPod, iPhone, iPad, etc.).  The iPod wasn’t the first mP3 player to hit the market.  Wikipedia says that the first commercial players arrived in 1998.  But they were very clunky to use, requiring several steps to transfer music from a digital library on a computer to the player.  And while it was easier than recording a vinyl album to a cassette tape (to date myself), it was nevertheless a cumbersome process. Enter the iPod in 2001.  Moving music onto it was fairly seamless, requiring only a couple of steps.  Organizing music was easy, and the whole system just plain worked.  Simplicity (achieved consciously and with a great deal of hard work behind the scenes) played a critical role in the meteoric rise of iTunes. Now apply that same kind of thinking to banking, particularly the mobile and tablet experiences.  Reducing a process from 10 steps to five isn’t going to change much behavior; moving from five steps to two will. Your task is to make new processes simple enough for the average consumer to be convinced that she should start doing something new.  How can you eliminate those crucial last few steps to get to something elegantly simple?