Consumers are inundated with accounts, apps, and subscriptions—often to the point where they lose track of what they’ve signed up for. This can be costly for consumers, but it also prevents financial institutions from gaining a clear view of a customer’s overall financial picture, limiting their ability to offer tailored services.
In a recent PaymentsJournal podcast, Kevin Hughes, Director of Product Management, Aggregation and Information Services at Fiserv, and James Wester, Co-Head of Payments at Javelin Strategy & Research, discussed how personal financial management (PFM) tools can help consumers stay on top of their accounts—and position financial institutions as the central hub for their customers’ financial lives.
A Unified Representation
With a PFM tool, a customer could visit a dashboard and see their mortgage account balance, recurring payments, and total transaction volume all in one place—saving them the hassle of logging into dozens of apps or websites.
Although all this data is available to the user across various platforms, a unified visual representation can be far more impactful.
“We talk a lot about subscriptions, where customers don’t really have the visibility or, let’s say, the sensitivity to it until they see it all in one place,” Hughes said. “That’s one of the things that is getting a lot of traction these days. I can suddenly see that I have 10 places that I make recurring payments to, and it gives me the opportunity to ask the question: ‘Do I need these?’”
Additionally, a PFM tool gives users another layer of protection. For example, a customer might overlook a suspicious transaction on an account they rarely use, but they could easily spot red flags within a centralized resource.
To make monitoring more effective, notifications play a key role in PFM platforms. For instance, a customer could get a notification if they make a transaction over a certain amount, approach their credit limit, or have a recent withdrawal exceeding a certain amount.
The flexibility to create personalized notifications and interactions helps customers be more proactive about their finances, which could add up over time.
“When you look at all of those subscriptions across a 12-month period of time, it’s amazing how much that means in terms of real money,” Wester said. “A $10, $20, $50 subscription that you don’t think about because it’s maybe over in this account, or you may not use it that much, suddenly you start putting those together and it’s now $500, $600, $1,200 a year that you can save.”
Creating Stickier Relationships
Because consumers increasingly maintain multiple financial services accounts, it makes sense to centralize the personal financial management tool at the user’s primary financial institution, where most of their transactions originate and settle.
During the initial setup, the consumer will need to add their account and subscription information into the PFM. This creates an opportunity for financial institutions to position themselves as the central hub for their consumers in a highly competitive landscape.
“It creates an environment where the consumer—from the bank’s perspective—becomes a little bit stickier to that relationship,” Hughes said. “When you see that trusted relationship at the core of all of your financial relationships, in that one place that you go, it does create the opportunity I think for a higher rate of retention for those customers and the opportunity for some cross-sell.”
Additionally, PFM tools can supercharge an organization’s marketing efforts because they provide the bank with data elements that weren’t previously available. Based on this data, the bank or credit union can then personalize their outreach to the customer.
Even if cross-selling isn’t an institution’s top priority, a PFM’s insights can be invaluable, as they give the bank an accurate view of their customers’ behaviors and financial picture.
“They can make better decisions on pricing, on risk, on scoring, on what products to serve to someone, and I think that’s all good stuff,” Wester said. “It’s good for the bank because they’re able to both grow that relationship, but also make decisions that protect the bank. When you use this data it helps a customer with their financial health, but it also helps the bank operate more efficiently.”
The Central Anchor
Sharing customers’ financial data with other financial services companies is a central tenet of the open banking model, which ultimately aims to give consumers greater freedom and access to better products.
The bar has already been raised. Modern consumers are now accustomed to choosing niche products and downloading multiple applications to meet their financial needs. As these accounts and relationships multiply, they will increasingly rely on PFM platforms to help them navigate this new paradigm.
“With the ability to have those multiple relationships, it’s become more important to have that central anchor, if you will, to be able to keep that stuff in sight and keep it in control,” Hughes said. “We all have people in our lives that we probably see that engage with a lot of different applications and it’s easy to lose sight of them. With the opportunity for more data sharing, it underscores the importance of having a tool like a PFM tool available for customers to keep them grounded.”
Although the open banking model is still relatively nascent in the U.S., it may follow a familiar playbook.
“I liken it to the way we look at healthcare,” Wester said. “I may go see a lot of specialists for lots of things, but I have my family doctor that’s ultimately the place where I go that knows me, knows my health, knows all of the things that all of those specialists are doing. They’re the place that ultimately, I go to hear what should I be doing from a health standpoint.”
“Same thing with PFM,” he said. “It’s for financial health, and I really do think that financial institutions positioning themselves in that same place as a primary care physician, where you have now options through open banking, you have all sorts of places where you can share your data. You can do all sorts of things, but ultimately, if all of that money is coming from that demand deposit account that you keep for paying bills—that is the center of your financial life.”
Whole-Picture Insight
There has often been a misconception that PFM tools are only for high-net-worth individuals, those with complex investments, or people looking for a robust account monitoring solution. However, financial health management is a universal need.
“Everybody can benefit from having that full picture,” Wester said. “If we go back to that idea of subscriptions—everybody has subscriptions. Everybody has a lot of subscriptions, especially now as we start unbundling things like cable and cell service and everything else. Being able to use a tool like that, it does benefit pretty much every consumer.”
There are also significant benefits for financial institutions. As consumer expectations continue to rise, users will expect more customizable and far-reaching oversight of their financial situation.
This means that banks and credit unions adopting PFM tools now will be better positioned to serve their customers in the future.
“We’re going to see less of a one-size-fits-all model and more of a configuration model as we go forward,” Hughes said. “As we move into a standardized model of data and a lot more use of APIs and that interaction, the data set becomes broader and the data itself becomes more reliable.”
“That’s one of the things that as we look at the evolution of data connectivity, those types of things that come out of those different types of models that will lead to just an easier connection, a more reliable connection, and ultimately the insight that can be derived from that—but with the whole-picture insight, not just a part of it at that time,” he said.
The post How FIs Are Cutting Through Subscription Clutter with PFM Tools appeared first on PaymentsJournal.
