Is It Time for FIs to Give Up on PFM?

Is PFM dead?

If not, financial institutions should kill it, and move on to financial management features that will really help customers, according to a report on the subject released this week by financial consulting firm Celent. Report authors Dan Latimore and Stephen Greer make the argument that banks shouldn’t be focusing on PFM, so much as PFE: personal financial experiences.

“PFM has been around for a while, and despite advancement,adoption has plateaued at 10%, 12% of users. Clearly something is not working,” Dan Latimore, senior vice president, banking, for Celent told Bank Innovation.

While PFM has become trendy in recent years, more than half of Tier 1 banks “have yet to launch a solution,” according to the Celent report. Additionally, the receptiveness of these features by consumers has been lukewarm at best, mostly because PFM features still require the user to make the bulk of their financial decisions themselves.

When it comes to consumer finances, users want their money managed but don’t especially want to do the managing, Latimore told Bank Innovation. Now is a prime time for financial institutions to make that jump, according to Latimore, because most of them are still working on PFM features but haven’t actually delivered them.

“With PFE, people don’t have to do the management. The customer doesn’t have to be nearly as active,” said Latimore. “Engagement increases wildly when you can just get rid of the [consumer] grunt work.”

Shifting from PFM to PFE would mean a larger focus on data aggregation for financial institutions, including opening up to third-party apps and other financial services.

Turning the focus to creating features with an “experience” as opposed to features consumers have to manage themselves could go a long way towards enhancing consumer stickiness, said Latimore.

“Very few people have a single financial relationship these days — and all of those different relationships they have matter,” said Latimore.