PFM tools are no longer a mere add-on in the banking industry. Due to market conditions that are constantly changing. Customers are increasingly demanding new features. With the latest investment structures and emerging technology, PFM tools are an absolute ‘must-have’. Also, consumers today, especially millennials and Gen Z, face a lot of challenges when it comes to personal money management. According to a study, 73% of millennials say saving is hard due to the economic conditions. As a result, there is a demand for sophisticated PFM tools that provide simple-to-use services that track expenses and offer budgeting features.
How Is It Beneficial For Banks?
The idea behind any PFM service provider is the same – to give the customers a better understanding of and control over their finances. In the past few years, several banks have started designing tools that provide their customers with better oversight of their financial lives. Banks ranging from Wells Fargo to ANZ began encouraging their customers to save more. Customers don’t always feel like they need a PFM tool, but they have a lot to gain from it. Yet, why do banks nudge their customers to save and budget their spending when a bank’s revenue comes from their customers? How can banks benefit from offering their customers PFM tools that essentially help them limit and control their spending?
There were several challenges before PFM tools became widespread. Some reasons were poor functionality, difficulty to use, and irrelevance to customers’ daily lives. So, yes, historically, banks suffered from low customer adoption rates. However, with the perfect combination of modern technologies, changing customer behaviours, and broader economic developments, PFM tools started to take off.
Banks today can offer contextual and personalised insights to their customers. By leveraging customer data, they can generate insights and provide smart recommendations for customers to become more aware of their spending and improve their financial health. When banks offer their customers intelligent PFM services as an add-on, it anticipates the customer’s needs and proactively suggests a plan of action. This helps the banks establish relationship-based banking with their customers.
AI-driven intelligent PFM solutions mean better money management for the customers and better customer engagement for the banks.
Meet The Next-Gen Customers & Their Financial Habits
Millennials and gen-Zers are a disruptive group of people. They were the first generation to grow up with the internet. From shopping to even therapy, everything they do, they do it online. This is a generation that is ready to pay money to help make their lives easier and get a quicker fix for things. Their values are simple – live and let live. But they also heavily indulge in things they love.
At the same time, millennials have also gone through economic downturns. Gen-Zers have seen how the pandemic can create financial dependencies. These two things have shaped their financial habits and made them highly aware of their expenditure. Some studies have shown that more and more millennials are becoming financially responsible by keeping a percentage of their income away as savings. This is indeed the time for banks to appeal to a whole new generation of customers.
PFM tools can make it big with the next-gen customers, not because of how technology is evolving. But primarily because of their collective values and behaviour. Banks are catering to the needs of millennial and gen-Z customers today, and they are heavily dependent on smartphones and the internet to get through their day. By leveraging emerging technology, banks can reel in suitable customers.
How Tech Can Help Them Get To Their Financially Sound Future
“Insights of modern technology can be competitive with someone who is personally advising you, and at a fraction of the cost.“. Luis Viceira, Professor and Senior Associate Dean for International Development at Harvard Business School, recounted while he was studying millennials and their adoption of PFM. His words resonate loud and clear as we see the world advance into the future armed with weapons like Artificial Intelligence and Machine Learning. By replacing traditional advisors with AI-backed advisors or Robo-advisors, banks can achieve relationship-based banking with their next-gen customers.
Thanks to our recent innovations, it has become relatively easy for banks today to make these offerings to their customers. It has also become easier for banks to market these solutions to their customers, as millennials and gen-Zers are heavy social media users.
Millennials follow a simple “set it and forget it” rule. They prefer to have some aspects of their life on autopilot. This is why tapping into the next generation of customers is critical for both banks and customers. Equipping them with the right PFM tools can allow them to automate their finances so that they can live their lives hassle-free.
Personal Financial Management has come a long way since its inception, but now is the time for banks to propel forward and bring their customers along.