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PFM Tools - Are they really useful in India?

Personal finance management tools enable an individual to track various expenses and better manage his or her money. Some of the features offered by such tools are single view of various accounts like checking, savings, loans, term deposits, credit cards etc. with various institutions, categorize and set limits for various categories of expenses, get alerts or notifications when exceeding the set limits. These tools also have capabilities to auto categorize the various expense on actual basis and represent them graphically and also calculate their net worth.

Shopping habits of Indians are changing fast for reasons like increase in younger population, exposure to global lifestyles, increase in income levels and disposable income, availability of new products and brands, easier access to credit, increasing brand awareness etc. Rather than need based, many times their spending is impulsive and the expenditure is likely to go out of control. The focus on savings also decreases in such cases leading to financial indiscipline.

The usage of personal finance management tools could bring in some kind of financial discipline by allowing setting limits for various categories of expenditure, setting saving goals etc. The alerts indicating overshooting of expenditure could help them rethink before actual spending. Their net worth display could lead them to think in terms of increasing savings and increasing their net worth.

So banks in India should focus on customer penetration for usage of personal finance management tools which is very minimal as of now. They can look at offering this service free of cost for customers having a predefined relationship value. They can also look at aspects like waiver of certain types of charges for customers who use their personal finance tool or offering some additional benefits. It will also help banks in marketing their other offerings like insurance, mutual funds and other savings products through these tools.

In the long run it will be beneficial to both individuals and banks if banks are able to increase customer penetration for personal finance management tools.  

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Comments: (1)

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 13 October, 2014, 12:05Be the first to give this comment the thumbs up 0 likes

One of my banks - a Top 5 private sector bank - launched PFM around 4 years ago and made it available free-to-cost to all customers. But, it pulled the plug on this app around 2 years ago. 

Banks can always relaunch PFM now but let's see how feasible that is. A "...single view of various accounts ... with various institutions" is a basic PFM functionality. Delivering it would require a customer to share the NetBanking credentials of all their financial institutions with the PFM-offering bank. This would break all rules imposed by banks forbidding their customers from sharing their PIN, password and other credentials with anyone, "not even with our own employee, however official looking" to quote a standard warning on the website of one of my banks. More in my personal blog post "How Many More PFMs Do We Need?" (hyperlink removed but this post will show up in the Top 3 Google results).

Against this backdrop, I'm keen on knowing how banks in India can offer PFMs.