Banks and the PFM (Data) Delusion

November 2, 2012

Over the last couple of days, an interesting debate has surfaced on why exactly consumers have not taken to PFM. American Banker was in on this discussion with a compelling article published yesterday entitled, “Banks and the PFM Delusion,” as was Jim Marous, who posted on PFM on Bank Innovation here.

The only problem is the Banker neglected to highlight the most glaring problem with bank PFM today: the data is lacking.

The American Banker article highlighted the problem with PFM as follows:

This spring, research firm Celent reported that only 4 percent of online banking customers at the top 50 banks are active PFM users. And in a September survey of more than 1,100 U.S. consumers, Aite found that only 27 percent use PFM from any host, be it their own institution or a third-party site like

These are not good numbers, folks. It is clear that PFM should be a — if not the – central PF tool for consumers. PFM is data aggregation in full and, as we all know, personal finance is largely a data-centric endeavor, or at least it should be.

So what is going on here? Why are consumers not taking to PFM?

This was one reason suggested in the article:

The problem, Aite research analyst Ron Shevlin says, is not a lack of promotion by banks to spark their customers’ interest. Instead, it’s a lack of recognition in the industry of what users want PFM to do for them.

“Why so few consumers use this tool is that so few are engaged or active in the management of their financial life,” says Shevlin. “Eighty percent of people don’t do budgeting. These are the people who aren’t the Quicken junkies.”

And as evidence of the dislocation in PFM, American Banker pointed out that when a few major financial institutions gathered to discuss PFM recently, “none of them agreed on what aspects of financial management should be part of PFM offerings.”

Are capabilities like budgeting and spending analysis enough? Or will PFM only gain traction when it becomes a factor in financial decision-making, through services such as real-time price comparisons or customized loan-rate appraisals?

These were rhetorical questions, but are they on point? Will more — and by “more” I include myself — consumers use PFM if, say, JPMorgan Chase and Wells Fargo agree on the capabilities that should be included in PFM? Additionally, as Ron argues, is this lack of adoption really just a function of consumers “who aren’t the Quicken junkies”?

I’m not buying it. To me, the problem is the data. As many readers of this blog know, I bank at Citibank (and, of course, I have no idea why — I’m an “inertia” customer). Citi added Yodlee’s PFM platform late last year. While I am on often — I make perhaps one (reluctant) trip to a bank branch per year — I would estimate that I have looked at the PFM app three times since it went live. Why? Because it doesn’t tell me anything. It relays the data in my Citibank account, but does not even include the data from a Citibank credit card I hold, never mind include data from beyond Citibank’s walls. Oh, I have a Mint account, and a PageOnce account, too, but Mint cannot facilitate transactions and PageOnce is not my bank, so it has limitations.

In short, either the data in lacking, as is the case with Citi’s PFM, or the functionality is lacking, as is the case with the non-bank service providers. You want people to use PFM? Make the data extensible. PFM must tell the full data story, not just the data story from one financial institution. Until it does, only 27% of American consumers will find it “useful.”

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10 Responses to Banks and the PFM (Data) Delusion

  1. mfriedrichs on November 2, 2012 at 11:53 am

    I love this quote probably because I’m in the 80%.:

    “Why so few consumers use this tool is that so few are engaged or active in the management of their financial life,” says Shevlin. “Eighty percent of people don’t do budgeting. These are the people who aren’t the Quicken junkies.””

    Low adoption of PFM reflects an interesting psychology, like “inertia” banking; it’s not entirely rational, but it’s a fact. I think that for many consumers PFM is trying to do the near-impossible– create a need where there is none. Even with better data, adopting PFM for many require making them do something they didn’t do before.

    Of course the canonical example of a company that has created a need out of nothing is Apple–but even they “started” with a product that replaced an existing product – the ipod for the walkman. Then touch screens and wifi, then telephones, then tablets. I wonder if an innovative PFM tool could build adoption in teh same way, by building from what consumers already want.

  2. George Colwell on November 4, 2012 at 8:11 am

    The problem with low PFM adoption, is the fact that it needs to be adopted at all. PFM functionality should be integrated into a banks on-line and mobile offerings without clients having to do much if any work. Using PFM functionality to aggregate historic bill payment data and present it in a value added manner at the point of paying a bill is one example. If when paying a bill a client was presented with the most recent amount the paid, the year to date total they have paid, and a comparative average payment for the same bill from a sampling of their peer group would be of significant value to the client. Integration is the key. On-line landing pages providing visual insight for a client related to how and where they spend their money can get them asking more questions about their finances.

    To make all of this happen banks need to plan the integration of PFM functionality carefully. They need, as JJ says above, to provide aggregation services. They need to do a significant amount of pre-work to ensure proper classification of transactions. Clients do have a significant amount of inertia and changing behaviours is not a quick or easy task. I say don’t try to change behaviours just leverage PFM to provide value added functionality and information at point of entry, point of sale, and point of payment. Customers will then decide how they want to use that information.

    The upside for banks? Providing the right type of PFM functionality coupled with complete aggregation of data makes for a stickier online and mobile experience. It also provides a significant amount of new data (aggregated data, and customer self segmentation) that can be used for new revenue generation via targeted real time offer, next best offer, next best step, and merchant funded incentives.

    • JJ Hornblass on November 4, 2012 at 3:06 pm

      George, you are right on target with this. Great points all.

  3. Online Banking on November 7, 2012 at 1:22 am

    Just love your post and the way you explain all the important details about the pfm and the data lacking.I am totally agree with all the comments.

    • JJ Hornblass on November 12, 2012 at 2:38 pm

      Thanks so much. I really appreciate your kind words.

  4. Otabek Saydikaharov on November 12, 2012 at 11:07 am

    Interesting article with interesting figures. Totally agree with the points that banks/PFM providers have to rethink what should be offered and how to meet customers real time issues. However, comparing to US customers it seems that European customers are more thirsty to such money management tools as PFM.

    According to Bankfutura e-Finance Research’s recent market research (can be found here:, about 56% of the Italians said that they would welcome PFM if it is available via their online banking, this number is lower – 47% – for the Germans which is also quite significant. Interestingly, significant number of the people are even ready to change their banks for PFM services.

    • JJ Hornblass on November 12, 2012 at 2:39 pm

      Interesting. Thanks for sharing.

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