Personal Finance Management (PFM) 2.0: A Key Tool for Todays Banks and Financial Institutions

Reverse Dwindling Customer Contact and Regain Customer Loyalty with the Reinvented Personal Finance Management Platform


As the world tries to deal with COVID-19, we see citizens, governments and businesses impacted in ways that were hard to imagine a few months ago. Enforced social distancing, unprecedented fiscal/monetary stimulus from governments, drastic fall in energy prices, mass adoption of digital tools, rapid transition from physical to digital interactions—with all of these factors in play there is no doubt that the world will be a different place going forward.

Like other institutions, banks will have to rapidly adjust to this new “normal”, while living up to the expectations of responsibly helping their customers drive the economic rebound that is so desperately needed.
Certain customers may be experiencing livelihood changes that may have impacted and drained their savings, while others although not impacted financially, may also be actively seeking a re-look at their finances to prepare for an uncertain future. In this context, most banks are looking at going beyond being just a financial service provider to embracing a role of helping their customers manage their finances better. They are envisioning ways to step up and transform into a trusted partner who can help customers manage their money more effectively, including prudently planning for unexpected rainy days. The answer for banks seeking this new role lies in the provision of an easy, reliable and secure Personal Finance Management (PFM) solution, which can serve the dual role of empowering their customers while enhancing their customer experience journey.

Ecosystem Changes Have Reinvented Personal Finance Management (PFM) solutions

A simple definition of a Personal Finance Management (PFM) solution is anything that allows users to aggregate financial transactions in one place and then use the data to manage their finances. This can range from pocket diaries as used by yesteryear generations to track expenses or designated envelopes for different expenses as used by our parents to excel sheets as maintained by some of us.

With the birth of the internet, the next generation of PFM grew to include online apps and platforms, embedded in digital banking, or as stand-alone apps piggy-backing off messaging services. While such products and services have been around for many years, the adoption of PFM by consumers was hindered for several reasons. Many consumers showed a lack of trust for digital platforms; some did not feel safe using the tool as they did not trust the Internet and the perceived security risks. The perception that someone else has access to their personal finances was a deal-breaker for many. Others detested manual entry and categorization of data, scrapping of screen and SMS, and the inability to integrate various banks. For banks, they were unable to justify the investment in PFM tools, since customers were reluctant to use it.

Today, with digitalization touching every area of our life, it’s a given that consumers now expect seamless digital tools to keep track finances. And PFM solutions of today have been reinvented by ecosystem changes across three significant areas. The present healthcare crisis has resulted in people paying more attention to how they manage their finances. People have become more conservative when it comes to their financial priorities, with discretionary spending falling, and saving, investing and loan repayment rising to the top of the list. Secondly, technology evolution in the space of Artificial Intelligence, Machine Learning and Big Data have enabled PFM tools to capture, integrate and analyze data more accurately and easily. Thirdly, Open Banking is gaining ground across geographies. Through this, the service provider can access customer’s data with his consent using the Open Banking Platform. All of the above have converged to eliminate the various challenges that hindered the adoption of PFM tools in the past.

PFM solutions of today have grown to provide so much more. Most tools provide cash flow view; spending patterns and analysis; budgeting and tracking expenses against budget; saving for specific goals/aspirations; net worth, and debt management—all in real-time. These tools can be augmented with advanced features such as Safe to Spend, which help customers to avoid impulsive spending and therefore avoid running short on obligations, Micro Saving to inculcate the saving habit, AI-driven Peer Comparison, which can help to benchmark against the social peers and much more. New PFM capabilities, driven by AI and ML capabilities can also include personalized financial advice, predictive cash flow analysis, automated money management, along with autonomous savings.

PFM—A Necessary Solution for Today’s Banks and Financial Institutions

PFM takes on a greater role in today’s context. Banks offering a PFM solution enable their consumers to gain a complete and accurate picture of their financial situation, empowering them to plan for the future and make better choices. Overall, a full-fledged Personal Finance Management (PFM) solution enables banks to—
● Offer a user-friendly Financial Management tool to their customers
● Indirectly influence customers to use digital payments/card payments
● Cross sale savings products such as Goal-based Savings (Financial Planning) and Micro Savings
● Understand customers spending as well as saving pattern to offer them suitable products
● Increase customer intimacy by helping them to manage their expenses and save

To help banks deliver what their customers truly need in these uncertain times, Clayfin is offering a New Financial Lifestyle Management Platform with advanced financial planning, spending insights, cash flow management, gamified personal finance fitness, and much more. With a complete financial understanding of their customers, banks can approach their customers sensitively, gain valuable customer insights, generate leads, adjust internal policies, optimize sales, and offer tailored financial solutions and services to their customers that make sense for their current situation.

Padmanabhan R

Padmanabhan RCareer Banker, Galleried Photographer and Travel Columnist. Also develop banking applications in free time. Finished my CA and have done my tour of duty with organizations like Times Group, ICICI Bank and Yes Bank, before landing up in Clayfin to create digital banking channel solutions.