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.