PFM: Your daily expense notebook, powered by AI

PFM Your daily expense notebook, powered by AI

Do you remember how your grandpa would meticulously note down every daily expense, right down to the toffee he got you? Or the handy little notebook your mom carried to ensure that your family didn’t overshoot the vacation budget?

Well, that’s PFM aka Personal Finance Management in a nutshell. Think of a PFM tool as a digital notebook that helps us manage our expenses and make informed financial decisions.

Across the world, national financial regulatory bodies are encouraging financial institutions to nudge their customers towards basic monetary hygiene. In this regard, PFM can become a helpful tool to drive up national savings, ensuring the socio-economic stability of a country, the BFSI sector and the people.

Here’s how.

Customers: Know thy money mind

Money management has always existed in every middle-class family. Digitization added a touch of efficiency to the entire process. From the grubby little notebooks our elders used to the swanky software pioneered by Intuit with Quicken and Microsoft Money in the 1980s and ’90s, the philosophy is the same — know what you spend and save before you spend.

This financial literacy, however, seems to have skipped the millennial generation.  Fast lives and faster transactions often take precedence over planning. A recent study by AON claimed that millennials will have to work way into their 60s and even 70s because they aren’t saving enough. And it’s not just down to too much avocado-on-toast or general financial apathy.

Young professionals want to make smarter money decisions, but time constraints and the lack of financial knowhow often act as deterrents. Millennials are so busy making and spending money that they neither have the time nor the resources to make their money work for them.

A PFM tool is designed to leverage Artificial Intelligence and machine learning to offer smart money management solutions based on a customer’s transactional behavior. Here’s how a conversation with a PFM chatbot could pan out:

Chatbot: Hi Paula, you have been spending around Rs 5,400 at the grocery store every month.

Paula: Oh, that’s a lot! Maybe I should cut down on my expenses.

Chatbot: I have another solution. Since you buy your groceries mostly from one supermarket chain, you could sign up for their ‘Membership Card’, and avail of discounts. From your previous transactions, I estimate you will save around Rs 1,000 every month.

Paula: Wow, that’s super!

In short, a PFM tool could help you go on your annual foreign trip and save enough to buy your first house by 35.

Banks: Know thy customer

The financial landscape has been forced into restructuring with a change in customer behavior, whereby the concept of all-for-one, one-for-all has become redundant. Consumers are now demanding more from their banks. They want personalized treatment for their pain points. This is where banks can turn to PFM tools.

PFM breaks down complex user data into usable information to facilitate improved bank-customer engagement and tailor-made financial solutions like goal-oriented savings and actionable budgeting recommendations, paving the way for banks and their customers to make more money. Win-win.

 Financial hygiene: Inspire thy citizens

Several countries have recently discovered a savings shortfall with respect to the global benchmark, forcing them to delve deep into their own coffers.

The US observed “America Saves Week” from February 25 to March 2 in a desperate attempt to get more people to save. The country’s savings rate is at 6%, the lowest since the 2008 financial crisis, according to the U.S. Bureau of Labor Statistics.

Countries in the Middle East have also been facing a cash crunch. Saudi Arabia’s Vision 2030 aspires to increase household savings from 6% to 10% of total household income.

This need gap leads regulatory bodies to put pressure on banks to increase savings by incentivizing fixed term deposits and conjuring up customized micro saving schemes. This is where banks can leverage learnings from customer data from PFM tools to make their savings instruments more attractive for customers.

Think of PFM as everyone’s BFF — best financial friend! It not only inculcates a habit of saving among millennials, but handholds the older generation through a seamless transition from notebooks to a cutting-edge and easy-to-use financial tool, to ensure smarter and easier money solutions for everyone.

Sudhir Nikharge

Sudhir NikhargeWith over 17 years of enriching experience in the industry, Sudhir is an expert in areas like Cash Management Operations, Product Management, Customer Engagement and Presales. Throughout his career Sudhir has contributed to the industry via various white papers and articles on topics like Payments, Cash Management, Revenue Management, Customer Centricity and Enterprise Sales. He has also assisted banks to evangelize the Revenue Management business, build business cases and define target operating models. Prior to Clayfin he has worked with eminent organizations like SunTec, CashTech Solutions (now Fundtech), Polaris and S1 Corporation (now ACI) in various roles such as Business Analyst, Product Manager and in Presales. He is married to Suprada Sudhir, who is a content writer. They have a four years old daughter, Anvita. In his free time Sudhir enjoys watching good movies / dramas, reading, writing and cooking.