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De-mystifying digital money management: 5 key elements for PFM success

Many people are confused by the resurgence of personal financial management tools, after hearing for years that digital money management (DMM) isn’t working and that customers simply do not want it.  We beg to differ, but can also understand why some banks have been disappointed...

In the modern world we could consider money management as a basic need for every single person. Even if individual needs may vary considerably, sooner or later almost everyone needs to manage their money in some way, shape or form. 

With this consideration in mind, it is obvious that the first digital money management solutions in the market created enormous expectations within the banking sector.


There was one major flaw in the design of the first digital money management solutions: user experience (or lack thereof). Even if everyone needs personal financial management at some point, only a small minority actually want to spend too much time and effort doing it. This even more true now than it was when the first PFM tools were introduced.

The second issue comes from a misguided perception of the target audience. The first digital money management tools on the market were designed for that small minority of users that were already managing their finances proactively with spreadsheets and similar offline tools. Initially, banks assumed the same desire would exist for the vast majority of their digital users - but that wasn't the case. 

Today the picture is quite different: now that the average customer has an app for to monitor and control almost every aspect of their lives, the market is ready and waiting for their online banking solution to enable them to actually manage their finances too. Banks have some catching up to do, and they need to do it before the likes of Google, Facebook and Apple beat them to it


After 10 years of working with banks on developing their digital offerings, there are 5 essential elements that should be present within a successful digital money management solution: 

  1. It needs to be effortless. Do not ask users to invest any time in your solution if you can’t offer value (that means seamless UX) from the very first touchpoint.
  2. It needs to be VERY understandable. Banks must make an effort to provide information that is easier to consume than a pie chart.
  3. It needs to be actionable. Rather than merely displaying a laundry list of transactions, present users with a concrete action that can be taken immediately to improve their financial health.
  4. It needs to be proactive. Users won’t invest their time looking for information, so banks need to engage them with intelligent notifications based on the data-driven analysis of their online and financial behavior.
  5. It needs to be accessible on any device. In the retail banking and FinTech industries, we refer to this aspect as "omni-channel", meaning the user can manage their money anytime, anywhere.


 Once you have the core components of your PFM nailed down, the next step is to take those tools and adapt them to target specific segments, such as the affluent or customers with small businesses.

Let's take business financial management, for example. The small and medium enterprise (SME) sector has been long neglected from a digital banking point of view. This is a very lucrative sector compared to retail:

  • Deposits from SME are, on average, 4x bigger than retail deposits
  • Balances are 15x larger
  • 89% of customers already bank online, and 68% of those have dedicated business accounts
  • Based on the latest market research surveys, 50% of those business customers would be willing to pay around 10 USD a month to receive BFM services.

By offering a more holistic money management tool dedicated specifically to SME finance, banks can become a true business partner for their SME customers. 

This article is reproduced with kind permission from the author, Dario Lombardi. You can read the original post here. 


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