As consumers increasingly embrace online and mobile banking capabilities, many are also looking for better technology to help them get a handle on their overall financial situation, and a growing number of banks are rolling out the tools to help them do it.
In a May 2014 BankChoice Monitor survey of bank shoppers conducted by the banking analytics firm Novantas, roughly one third of respondents reported that they already use personal finance management tools, or PFMs, for their financial planning and budgeting. Of those PFM users, the survey showed that 72 percent are turning to independent personal finance websites, such as mint.com, to gather and organize financial data on their spending and saving activity, but 40 percent of them would opt for PFM services through their own bank’s website or mobile app, if available. In addition, 46 percent of bank shoppers under age 30 want to know about the PFM tools offered by banks when they are making their decisions about where to take their financial business.
This growing demand is the driving force for retail banks that are developing their own online personal finance management options for customers, said Michael Sadofsky, senior vice president and chief marketing officer for Republic Bank.
“Clients are asking us for it. They want the ability to manage their money and to budget, and they feel very confident in their bank in helping them accomplish that,” Sadofsky said.
While consumer interest in PFMs has come from all demographic groups, Millennials in particular are looking for better financial management tools to help them reach their financial goals, said Steve Kelly, executive vice president of marketing and sales for Central Bank.
“They are extremely savvy shoppers,” Kelly said of today’s younger generation of banking customers, “and they are looking for the highest value for the dollar that they spend.”
In April, Central Bank updated its online banking services to include a personal financial management “dashboard” that allows consumers to view all their financial activity with multiple institutions in one place. In addition to accessing their Central Bank account information, customers can opt to enter log-in information and passwords for their financial dealings outside of Central Bank in order to get a more complete and up-to-date picture of how they are spending and saving their money. The bank itself does not have access to the customer’s financial information from any other institution; it merely serves as a secure portal for customers to view all their financial information in one place.
“The two critical issues are trust and time,” Kelly said, in terms of consumers’ decisions to use PFM tools that offer account aggregation services like Central Bank. Customers must invest some time upfront to set up their system and input their financial information, but the effort saves time in the long run, Kelly said — especially when combined with new services such as automatic bill payment. Customers also have to feel confident in the website’s security, which can be an advantage for banks in providing PFM services.
“There are many other PFMs out there that do the same thing,” Sadofsky said. “But with us, it’s all done behind the security of a bank and the security that we put into all of our accounts.”
Republic Bank has offered its own personal financial management program for roughly six years, Sadofsky said, but improvements in the service in recent years have leveraged more online and mobile capabilities to reflect how more consumers are choosing to bank. Added features range from text alerts that warn customers when they approach their spending targets to the ability to categorize regular expenditures across accounts from specific vendors (such as listing all charges from a movie theater as “entertainment”) for easier budgeting. For customers working toward specific savings targets, PFMs can help them analyze different timeframes and set up automatic transfers to help them achieve their goals, Sadofsky said.
“It looks at all of your spending — not just through the bank, but any credit cards or any other accounts you might have at other institutions,” Sadofsky said. “And it can also compare [category spending] against the average of what you have spent previously.”
Kelly said that roughly half of Central Bank’s customers use the bank’s ebanking services. Of those customers, about one-third have accessed the financial management tools online at least once since the roll-out of the service in late April. Most of them have not yet taken the added step of entering their financial information from other institutions, Kelly said, but the usage has exceeded the bank’s initial expectations with only limited promotion.
Central Bank’s small business customers can also use the financial management tools to keep track of their company’s financial dealings, Kelly said. Companies with more complex banking needs, such as those that require a large number of money transfers, may be better served by more robust tools, which Central also provides, Kelly said, but the simplified tools can save time for businesses with more basic banking requirements.
“Our small business growth has been some of our fastest, frankly, because they are interested in saving time,” Kelly said.
By offering PFM tools, banks are looking to solidify their relationships with customers, while offering a level of personal service that faceless third-party websites can’t provide, Kelly said.
“There’s less risk of us losing them to another provider,” Kelly said.
Kelly added that the average consumer has seven or more separate financial relationships, including bank accounts, mortgages, credit cards and student loans. However, the average number of relationships that a consumer maintains with a single bank is only three, creating plenty of opportunity for banks to grow their business with existing customers.
And as the mobile banking business continues to expand, retail banks are also exploring more ways to enhance their PFM tools for mobile banking users.
“You are dealing with a lot smaller screen, so it does have some challenges,” Sadofsky said. “But people are moving away from laptops to tablets and mobile phones, and therefore our services are moving the same way. ... They want to be able to go to one resource and do everything, and we want to be the one resource.”